Jeremy Grantham on Market Psychology, AI, and Overinvestment Risk

March 24, 2026 - 15:05

Investment strategist Jeremy Grantham, renowned for his analysis of market bubbles, is raising a red flag on the current surge of enthusiasm surrounding artificial intelligence. He draws a direct parallel to historical manias, where transformative technological ideas led to dangerous periods of overinvestment and subsequent financial pain.

Grantham observes that the most significant market bubbles are consistently linked to genuinely revolutionary concepts—from railroads to the internet. While AI undoubtedly represents a powerful and legitimate breakthrough, he cautions that this very quality makes it particularly susceptible to speculative excess. The justified optimism, he argues, creates a breeding ground for irrational behavior, where capital floods in far beyond what the emerging industry can productively absorb in the short term.

This pattern of overinvestment, according to Grantham, inevitably leads to poor returns and a painful correction as reality fails to meet inflated expectations. His warning serves as a sobering counterpoint to the prevailing market narrative, reminding investors that even the most promising innovations are not immune to the cyclical forces of psychology and greed. The key risk, he implies, is not in the technology itself, but in the unsustainable financial frenzy it can inspire.