Markets are climbing, optimism is high, and artificial intelligence is powering a historic surge led by companies like Nvidia and Alphabet. But veteran investor Jeremy Grantham is urging caution, warning that the US market is now in what he calls the ‘biggest stock market bubble ever.’
Grantham believes the current rally—fueled by AI enthusiasm—has pushed valuations beyond previous extremes, even surpassing the dot-com peak. He cautions that the eventual correction could be severe, potentially echoing the scale of the Great Depression.
‘It is highly unlikely that this high will not be followed by a fundamental unravelling, like it was in 1929,’ Grantham said, The Telegraph reported.
AI Boom Does Not Eliminate Bubble Risk
Grantham acknowledges that artificial intelligence is a transformative force reshaping industries and productivity. However, he stresses that technological breakthroughs do not prevent speculative excess.
‘You have populations shrinking, climate problems, resources running out, geopolitics, global trade—it’s a long list, and yet the market is even higher priced than 2000.’ According to him, investors are overlooking structural risks while chasing growth narratives tied to AI.
Big Tech Leads—But Is Not Immune
The rally continues to be dominated by a small group of powerful companies: Alphabet, Amazon, Apple, Microsoft, Nvidia, Tesla and Meta. Unlike previous bubbles, these firms are profitable and deeply embedded in the global economy. Grantham even admits their long-term appeal.
‘I wouldn’t mind owning Google probably, if I knew we were going into the next Great Depression.’ Still, he warns that strong companies can suffer steep declines when valuations become excessive. He points to the dot-com era as a reminder. Amazon surged during the boom but later fell 92% before recovering and eventually dominating its sector. ‘Just because Nvidia will go down a lot one day, that doesn’t mean it isn’t a great company.’
Grantham compares today’s AI-driven enthusiasm to the railway boom of the 19th century—an era that transformed economies but led to widespread investor losses due to overinvestment. Too much capital chased too many projects, resulting in financial destruction even as the underlying technology proved valuable. He suggests the same pattern could unfold with AI.
Bubble Not Yet at Its Peak
Despite his concerns, Grantham believes the market has not yet reached its final stage. Historically, bubbles peak when investors begin shifting capital from high-growth stocks to safer, traditional companies. That rotation has not yet occurred.
‘What we’re missing is the final indicator, when the Coca-Colas outperform the hot shots.’ As long as technology stocks continue to outperform, he sees continued optimism—and risk—in the market.
Grantham also highlights how political developments, particularly those linked to figures like Donald Trump, can amplify market volatility. ‘He gets everyone really excited… If I could just predict his next move, I could go and short oil futures.’ Such speculation, he argues, adds another layer of instability during already overheated conditions.
Why Warnings Are Rare on Wall Street
Grantham believes large financial institutions are unlikely to advise investors to exit the market—even if risks are clear. ‘You will never be told by major players to get your tail out of the market… it’s just not going to happen.’ He argues that their business models depend on keeping clients invested, which shapes public messaging.
While long-term investing remains a widely accepted approach, Grantham cautions against applying it blindly in extreme market conditions. ‘Buy-and-hold is a fine strategy 80% of the time. But in a super bubble… that seems to me an expensive discipline.’
Where Should Investors Go?
Grantham offers limited guidance on alternatives. He previously pointed to undervalued regions such as Japan, the UK and Europe. Now, he suggests focusing on the cheapest available assets depending on market conditions. ‘In 1929, cash looked pretty good.’
Grantham’s outlook stands in sharp contrast to prevailing optimism. Yet his views are grounded in decades of studying market cycles and bubbles.
Referencing economist John Maynard Keynes, he notes: ‘The cardinal rule in life is never be wrong on your own.’
Still, Grantham remains comfortable taking a different stance. ‘I don’t mind being wrong on my own.’ For now, markets continue to rise. But his warning is clear: when valuations drift too far from fundamentals, history suggests the correction is only a matter of time.