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AI Bubble · Jeremy Grantham · Market Cycles · Tech Innovation
Jeremy Grantham, in a Morningstar interview, asserts the current AI-driven market surge is a unique bubble, merging a 2021 classic bubble with the rapid rise of the "Magnificent Seven" in 2022-2023, predicting an inevitable crash despite AI's transformative long-term potential.
Grantham draws parallels to historical bubbles like railroads, canals, and the internet, where groundbreaking innovations led to excessive enthusiasm and subsequent market corrections. He notes that while AI will "change everything," the market consistently overhypes such ideas in the short term, leading to significant downturns.
For instance, Amazon surged multiple times in 1999 but then plummeted 92% during the dot-com bust, with 80% of internet stocks ceasing to exist. Grantham expects the AI market to follow this pattern: short-term overvaluation, an intermediate-term crash, and then long-term emergence as a world-changing force.
