Artificial intelligence is pushing humanity toward a more efficient future, but like any world-changing technology will eventually crash and hurt investors, according to longtime Wall Street doomsayer Jeremy Grantham.
The co-founder of Boston-based GMO, speaking in the latest Merryn Talks Money podcast, compared burgeoning AI technology to the 19th century expansion of the British railroads.
“Everyone lost their shirts. It was one of the most spectacular busts,” Grantham said. Heaps of money piled into a network that elevated GDP and productivity, but “every really important new technology has had a bubble around it,” he said.
Grantham, 86, is well known for gloomy forecasts that have occasionally preceded major selloffs, but has more recently missed the mark. He called the post-pandemic surge in equities “in many ways about equal to the 2000 tech bubble,” but said its deflation was interrupted by speculation on AI.
The birth of ChatGPT injected much-needed capital into the economy in 2022, but the industry will eventually crush smaller players much like the internet did in the dotcom boom and bust, according to Grantham.
“The internet, again, was obviously going to change everything. And it sucked in lots of money, lots of dotcoms and everything had a spectacular blowup,” he said. “Very few things have been as obviously important as AI. It will, of course, change our world. It is, of course, impossible to know in what ways and whether it will be entirely beneficial or not.”
Investor fervor surrounding AI and now cryptocurrency has pushed tech stocks to lofty valuations, but Grantham is warning against unwavering optimism. Bitcoin and cryptocurrency don’t “produce anything,” he said. “None of them are a medium of exchange, materially, but they are wonderfully speculative.”
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