Stock market crash: the AI ​​bubble will burst like the old manias, says Jeremy Grantham

• Jeremy Grantham claims that artificial intelligence is a stock market bubble similar to the tech geeks of yore.
• He compared the hype around artificial intelligence to the Internet craze of the 1990s and the rail boom of the 1920s.
• He predicts a sharp decline in share prices, but the rise of artificial intelligence will have long-term transformative effects.

The endless AI market hype is a classic bubble that has followed the path of others throughout history.

That’s according to veteran investor Jeremy Grantham, who predicts a difficult road ahead for the stock market as the bubble expands. Losses will accumulate when the AI ​​stock bubble bursts because artificial intelligence is no different from other tech manias that have temporarily blown up the stock market, he said in a recent interview with Morning Star.

“The bigger the new idea, the bigger the new invention, the more overpriced the market becomes, the more euphoria it creates. This is not a coincidence,” Grantham said.

Grantham likened the excitement about artificial intelligence to dot-com erawhen the internet became mainstream, and the 1920s, when railroads and electrification changed everything. These tech manias have led to “spectacular bubbles” in stocks in the past, Grantham said, and artificial intelligence is no exception.

“Really great things are happening in the Internet era, in 98-99. But they are exaggerating,” Grantham said. “When we have these great achievements, they overdo it in the short term, they fail in the medium term, and then they emerge from the rubble and change the world in the long term. And I expect that’s what will happen this time, he added, although he had no specific predictions about how much stocks might fall or when a crash might occur.

Other market commentators warned investors artificial intelligencepointing high valuations In technology sector and massive spending by businesses with no clarity on when it might yield a return.

David Rosenberg, one of Wall Street’s most bearish economists, said the market is in the middle of “mega bubble” was headed for a “spectacular” correction, as evidenced by indicators such as the historically high price-to-earnings ratio and high share ownership among households.

– said John Hussman, another uber-bear forecaster the company’s shares appeared to be the most overvalued since 1929according to the most reliable internal measure of valuation of his company.

Grantham has also repeatedly warned against steep stock market losses over the years, though his predictions have met with varying degrees of success. In 2022, he warned investors against the emergence of a multi-asset “superbubble” in shares and predicted that The S&P 500 Could Fall by 43% from the level at that time. The benchmark index fell about 25% in 2022, but fully erased that loss in 2023 and is up 20% this year.