Jeremy Grantham says historians a century from now may write about the current AI boom the way they write about the South Sea Bubble. The veteran bubble watcher, speaking in the latest episode of MoneyWeek Talks with Andrew Van Sickle, argued that the race to build artificial intelligence is already showing the kind of excess that ends with investors getting hurt.
That warning matters now because AI-linked companies are commanding eye-watering valuations even as the spending keeps rising. Grantham, who built a reputation for spotting the Japanese bubble in the 1980s and avoiding the tech fever that ended in the dotcom crash, is not dismissing the technology. He is saying the market around it may be setting up a far more dangerous trade.
He pointed first to SpaceX, saying the company’s prospectus is “actually unbelievable” because it links revenue streams 90% to AI while also talking about mining asteroids, colonies on Mars and moving through space. He said the company is running at huge losses at the moment, and he mocked the scale of the ambition as “talk about tulips.”
Then he widened the point. Grantham said the more obvious and important an idea looks, the more capital it attracts and the more likely it is to end in a bust. He compared AI to the railroad boom, saying railroads transformed life and added enormous productivity, but that everyone built too many of them and everyone lost money. In his view, the same pattern is coming again.
The comparison lands harder because he is talking about a technology he still sees as real. Grantham said AI is impressive and transformative, but he also said the firms chasing it now are behaving as if there can be only one winner. He said the history of the Magnificent Seven has changed from the old picture of seven separate monopolies: Amazon dominates retail sales, Tesla gets a leap ahead in EVs, and now all of them are aiming at AI.
That is where the story turns from enthusiasm to combat. Grantham said the companies are telling investors the main risk is not spending enough and that they will pour in their vast cash flows. He said whoever reaches AI first will have a license to make more money than anyone has ever made at anything in history, which is exactly why the fight will be so destructive. “There can only be one,” he said.
He went further, saying the contest could be the most vicious fight to the end we have ever seen, starting now. In that kind of struggle, he said, the firms do not make much money and the stocks get crushed before the survivors emerge from the wreckage like the internet. The unresolved question is whether investors are funding a durable industry or backing a race that will leave them holding the losses while the technology itself lives on.
