Grantham: SpaceX a sign of AI bubble; bitcoin will hit zero

Jeremy Grantham, co-founder of investment firm GMO who manages about $85 billion, stated in a recent interview that artificial intelligence represents the largest investment bubble in U.S. history.

He warned highflying AI stocks could drop as much as 70% and compared current enthusiasm to past manias around railroads and the late-1990s internet. He noted that Amazon rose six to seven times in 1999 before later falling about 92%.

Grantham pointed to SpaceX as an example of speculative stretch, citing company statements that its addressable market equals a quarter of global gross domestic product and references to asteroid mining. “In 50 years, people will look back and tell stories about SpaceX and its prospectus, like they tell stories about the South Sea Bubble,” he remarked.

He noted U.S. equity valuations currently trade around 35 to 40 times earnings, compared with Japan’s 65 times at its 1989 peak. Japan then entered a two-decade slump and took about 35 years to fully recover. Grantham also highlighted that retail investor participation reached historic highs in 2025.

For ordinary investors, he recommended allocating roughly 60% of savings to broad non-U.S. equity indices covering emerging markets, Europe, Japan, Canada and Australia. He cited recent performance showing emerging markets up about 65% over the prior 12 months versus roughly 25% for the S&P 500. He advised the remainder go into bonds, a small position in precious metals and real estate where practical, and suggested buying U.S. government bonds directly at treasurydirect.gov to avoid brokerage fees. “Don’t own US stocks,” he advised.

Grantham criticized incentives at large investment firms, arguing advisers rarely tell clients to exit markets because caution can be seen as incompetence. He recalled that GMO lost half its client base during the two years it warned ahead of the 2000 market crash.

On bitcoin and other cryptocurrencies, he said he has never owned any and does not intend to. He described bitcoin as “an unnecessary piece of nonsense,” stated it facilitates criminal transfers, functions poorly as a medium of exchange and is highly volatile. He predicted that in the distant future bitcoin will “certainly go to zero.”

He also discussed housing and inequality, noting typical U.K. home prices rose from about 3.4 times family income in 1994 to more than 10 times in some areas. He said a 30% price drop would still leave homes expensive by historical standards. He placed U.S. income inequality, measured by the Gini coefficient, alongside countries such as Brazil and Mexico and recommended gradual tax changes to restore broader prosperity.

For business leaders and workers, Grantham recommended conserving cash and preparing for tighter credit. He advised entrepreneurs to lock up capital where possible and workers to develop practical skills in engineering and repair. He pointed to countries with stronger social safety nets, including Denmark, Japan, France and Germany, as examples for outcomes on measures such as maternal mortality and life expectancy.