Jeremy Grantham Warns of 70% US Stock Decline, Cites AI Bubble
Investor who predicted 2008 crash says US stocks are overvalued and a severe correction is likely.
Jeremy Grantham, the investor known for predicting the 2008 financial crisis, has issued a stark warning to US stock market investors. He recommends selling US stocks, cautioning that a decline of up to 70% is possible.
Grantham argues that an artificial intelligence (AI) bubble has made US equities the most expensive in history. He points to extreme valuations and speculative enthusiasm around AI-related companies as key risk factors.
Track Record of Gloomy Predictions
Grantham, co-founder of asset management firm GMO, has a history of calling market bubbles. He correctly foresaw the dot-com crash in the early 2000s and the housing market collapse in 2008. However, his bearish outlooks have sometimes been early, missing further upside.
He has been warning about overvalued US stocks for several years. In 2021, he described the market as a "epic bubble" and predicted disappointing returns, though stocks continued to rise before correcting in 2022.
Grantham's latest caution comes as the S&P 500 trades at elevated price-to-earnings ratios, driven partly by enthusiasm for AI technologies like those behind ChatGPT.