Jeremy Grantham: AI Mania Is Inflating History's 6th Bubble — 50% Correction Inevitable

In this video, Grantham — with a career track record that includes predicting the dot-com bubble and the 2008 crisis — registers today's market as history's most extremely overvalued point.

Why the 'Sixth Bubble'? Grantham's historical bubble list: 1929 US stock market, 1989 Japan, 2000 dot-com, 2008 housing, 2021 SPAC/crypto frenzy. Sixth is now: the US stock market fueled by AI mania. They all share a common feature — at the time, everyone said "this time is different."

Shiller P/E at 39 — Surpassing 1929 The inflation-adjusted Shiller P/E ratio reached 39. This figure exceeds pre-1929 levels; only the 2000 dot-com peak was higher. The historical average is 16-17. Closing this gap means a 50% correction.

AI IPOs and Passive Fund Danger The massive flow of money into big tech IPOs and passive index funds continues to inflate prices disconnected from fundamental analysis. The top 10 stocks in the S&P 500 make up 35% of the index — this concentration is dangerous.

Five Years for Value Investors Grantham expects that over the next 5 years, broad-based value investors will significantly outperform heavily tech-concentrated indexes. Preferred areas: energy, agriculture, international value stocks, and emerging markets.

So What About Timing? Grantham openly says he doesn't know when the bubble will burst. But he is certain it will: "This bubble will end like the others — badly."