This investor predicted the dot-com bust. He thinks AI is a bubble that will ‘deflate’

Is the artificial intelligence boom a bubble or the real deal? GMO’s Jeremy Grantham has an answer Wall Street may not like.

A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link. New York (CNN) — Is the artificial intelligence boom on Wall Street a bubble primed to burst or the real deal? That’s the question investors have wrestled with since the Magnificent Seven tech stocks began turbocharging a powerful market rally last year. Jeremy Grantham, the investor famous for predicting the dot-com crash in 2000 and the financial crisis in 2008, has an answer Wall Street won’t like: He believes that AI is a bubble that could start letting out some air. “A new bubble within a bubble like this, even one limited to a handful of stocks, is totally unprecedented,” he wrote in a Monday blog post. “The best guess is still that this second investment bubble — in AI — will at least temporarily deflate.” Tech stocks surged to eye-popping heights in 2023, and that story has continued this year. Monster gains in shares of tech giants, particularly US chipmaker Nvidia, have propelled all three major indexes to all-time highs. The S&P 500 index on Tuesday logged its 17th record high close of 2024. Grantham, who is co-founder of Boston-based GMO LLC, isn’t buying it. “The long-run prospects for the broad US stock market here look as poor as almost any other time in history,” he wrote.