Jeremy Grantham: Investing like a legend of the stock market

The battle for AI will be among the bloodiest ever, according to renowned billionaire investor Jeremy Grantham, who speaks to BFIA

Stock market bubbles are a specialty of Jeremy Grantham. He identified the Japanese bubble in the 1980s. Additionally, he wisely refrained from jumping into the tech bubble that burst during the .com crash.

Does he believe a bubble is forming now that everyone is focused on the enormous valuations AI companies are commanding?

Grantham told BFIA editor James Mackreides in the most recent episode of BFIA Talks that historians will write about this event a century from now in the same manner that they write about the South Sea Bubble, one of the first and biggest financial crashes in history.

Grantham indicates SpaceX. He declared: "The SpaceX prospectus is truly astounding. Moving through space, mining asteroids, establishing colonies on Mars, and projecting revenue streams, 90% of which appear to be related to artificial intelligence.

Additionally, it's unclear whether their version of AI, which Anthropic and the other boys are currently trashing, will survive. Forget about 90% of this enormous revenue stream from the largest business in human history.

Naturally, they are currently losing a lot of money. Give me a break, please. What a show of faith. Let's discuss tulips."

Grantham is not against AI's transformative potential, though. He thinks it's amazing. He is wary of the industry's current situation, though.

He used the railroad boom as an example, citing it as a similar significant technological development that significantly increased productivity. The market still crashed, though.

"People are unaware that the likelihood of attracting excessive capital and experiencing a market bust increases with the obviousness and importance of an idea."

"The railroads changed our way of life. They increased productivity significantly. Nevertheless, everyone built too many railroads and lost money because it was so clear that they would do that. AI is going to do that."

He went on to say that comparing the Magnificent Seven's past to their plans for the future reveals two very different worlds.

"You have seven monopolies in retrospect. Amazon controls retail sales, Tesla advances in EVs, and so forth. They each bestrode the world, eliminated their junior rivals, and acquired the intriguing up-and-coming competitors."

However, the future appears very different. Rather than having seven monopolies, they are all working toward the same ultimate objective, with other businesses chasing after them. Artificial intelligence is that aim.

According to Grantham, the companies think that whoever arrives first will be able to earn more money than anyone has ever made at anything in history.

They all claim that insufficient spending is the primary risk. We will spend our enormous cash flows; my 200 billion is greater than your 107 billion. In a way, it's like a gorilla festival where everyone jumps into the ring to fight to the death.

There is only one possible. Until one of them survives, they will fight. You're insane if you believe that this is similar to the seven different monopolies.

"This may be the most brutal battle to the end that we have ever witnessed, beginning right now. And there are already many indications of it. They don't make much money in that kind of battle, and the stocks crash. Then, like the internet, they come out of the rubble.

This will rise from the ashes, just as railroads did."

For our complete interview with Jeremy Grantham, listen to BFIA Talks. You can listen to the podcast wherever you get your podcasts or view it on YouTube.

Regarding the podcast.

You can discover the keys to financial success by listening to the podcast BFIA Talks. Influential guests, including CEOs, business owners, economists, and legislators, join editors James Mackreides and James Mackreides to share their best advice on money management, prudent investing, and accumulating wealth.

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