Wall Street veteran warns of epic stock market crash

On the latest episode of Steven Bartlett’s podcast, The Diary of a CEO, legendary investor Jeremy Grantham said the AI stock boom has entered the same danger zone as the great market bubbles that investors typically study only after they burst.

Over the past couple of years, AI stocks have done the heavy-lifting, with mega-cap tech, chipmakers, and growth funds carrying the market to new highs. 

For perspective, according to Yahoo Finance historical data, AI posterchild Nvidia closed at about $16.89 on Nov. 30, 2022 (after ChatGPT’s launch).

The stock is currently trading around $193.75, according to market data, up about 1,047%, or roughly 11.5 times, from that pre-AI boom level. 

Grantham sees something very different.

Wall Street has been buying the AI future, but Grantham is calling it the clearest warning sign of a market peak.

He underscored the tremendous speculative euphoria now visible across the market, pointing to AI high-flyers and stretched stories about future profits, addressable markets, and transformative technology.

Apart from valuations, Grantham warns that a bubble break is likely to hit wealth, spending, hiring, and the broader economy.

Who is Jeremy Grantham?

Jeremy Grantham is far from being just a regular stock market skeptic.

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The co-founder of GMO Investments built his reputation as one of Wall Street’s best-known bubble watchers, with prescient warnings around Japan’s 1989 crash, the 2000 dot-com bust, and the U.S. housing crisis before the 2007-2008 financial collapse.

Given his tremendous track record, investors continue paying attention to his calls when Grantham warns that stocks are looking dangerously stretched.

But his reputation also comes with a caveat. 

His own famous warning captures the difficulty of trading around bubbles: “The market can stay irrational longer than the client can stay patient.”

Nonetheless, like Ray Dalio, investors tend to treat his takes with both respect and caution.

What Jeremy Grantham said about the AI rally

Grantham made the relentless AI rally the center of his latest market-bubble warning.

The GMO co-founder said in Steven Bartlett’s podcast that U.S. stocks are in what he called the “biggest one in American history", arguing that AI high flyers have pushed the market into dangerous territory. 

Grantham said a deep drop in the most expensive AI-backed names cannot be ruled out, with prices potentially dropping as much as 70% if the bubble breaks. 

He also argued that this cycle looks different from earlier tech booms. Railroads and the internet had clear utility and visible economic impact, he said, while today’s AI enthusiasm is being sold with much bigger assumptions about future markets and profits.

“The indicators of crazy euphoria, like SpaceX, are all over the place,” Grantham said on Steven Bartlett’s podcast. He pointed to SpaceX, describing its addressable market as “a quarter of the global GDP", calling it “the classic description of a market peak".

AI is real, but according to him, the market price around it may already have moved too far.

The case against Grantham’s AI bubble warning 

That said, not everyone believes that the AI rally is another dot-com bubble waiting to burst.

The contrarian case starts with earnings. 

BlackRock argues that today’s tech giants are built on real profitability, disciplined capital allocation, and broad-based adoption, not the kind of speculative froth we saw in the late-1990s internet boom. 

Moreover, Morgan Stanley made a similar point. 

In its 2026 outlook, the bank said the AI-led rally could still broaden as productivity gains move beyond the megacap hyperscalers and into the wider economy. 

Similarly, according to Yahoo Finance, Goldman Sachs is also treating AI less like a narrow software frenzy and more like a physical infrastructure cycle. 

The bank estimates roughly $7.6 trillion of global AI infrastructure investment from 2026 to 2031 across compute, data centers, and power.

Even Fed Chair Jerome Powell has drawn a line between AI and the dot-com era, saying today’s leaders “actually have earnings", as reported by Fortune.

What investors have to watch before the rally cracks 

Investors need to monitor the data to judge whether Grantham is early, wrong, or right about his stark call on AI stocks.

The first test is earnings.

If AI leaders keep delivering stronger revenue growth, wider margins, and clear returns on massive infrastructure spending, the market can argue that high valuations are being earned.

The second test is inflation and interest rates. 

Cooler inflation, weaker jobs data, and lower Treasury yields would give growth stocks a lot more room to run because future profits become easier to discount. That supports AI names, software stocks, and the broader Nasdaq trade.

The danger comes if the opposite happens. 

Sticky inflation, stronger hiring, trends, or a more hawkish Fed would raise the discount rate on long-duration growth stocks and pressure the same expensive leaders that carried the market.

Moreover, AI demand is the final proof point. 

Investors need to see spending move beyond chips and cloud buildouts into real productivity gains, customer adoption, and profit improvement across the economy.

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