Market Legend Who Called the 2008 Crash Now Warns of a 70% US Stock Collapse

Jeremy Grantham, co-founder of asset management firm GMO and one of the few investors credited with accurately predicting previous market crashes, has issued a stark new warning: US equities are sitting at historically extreme valuations, inflated by an AI-driven bubble that could eventually erase as much as 70% of their value.

Speaking on CNBC, Grantham delivered a straightforward message to investors — exit US stocks and redirect capital toward international markets. His tone left little room for ambiguity.

**AI Euphoria Meets Dangerous Overvaluation**

At the core of Grantham's thesis is a simple but alarming observation: since 2010, US price-to-earnings ratios have consistently run more than 60% above their century-long historical average. He attributes this distortion primarily to years of near-zero interest rates that flooded markets with cheap capital.

Grantham is not dismissing artificial intelligence as a technology. He acknowledges its transformative potential. What concerns him, however, is the near-religious faith investors have placed in AI's ability to justify lofty valuations — a sentiment that mirrors patterns seen during past speculative manias. Overinvestment driven by unchecked optimism, he argues, is a classic precursor to a painful correction.

His bubble framework, which has historically tracked speculative extremes followed by mean reversion, now points to a potential drawdown of 50% to 70% in the market's biggest winners. As for timing, Grantham himself acknowledges the uncertainty — the unwind could begin anywhere from a fortnight to two years from now.

**A Track Record That Commands Attention**

Grantham's warnings carry unusual credibility. He publicly identified the dot-com bubble near its 2000 peak and raised alarms about the US housing market in 2007, well before the financial crisis unfolded. His 2021 warning about an "epic bubble" came earlier than the market's actual peak, as stocks continued rising before declining in 2022 — but the broader direction proved correct. Notably, investor Ray Dalio has independently flagged similar risks tied to deteriorating liquidity conditions.

**What This Means for Crypto Markets**

A stock market correction of the magnitude Grantham describes would almost certainly reverberate across digital asset markets. Bitcoin has increasingly traded in sync with high-growth technology stocks, meaning a broad risk-off environment tends to hit crypto markets swiftly and severely.

There are already signs of stress. US spot Bitcoin ETFs recorded a historic 30-day outflow of $6.35 billion through mid-June, according to data from Galaxy Research. Bitcoin was changing hands near $59,663 during the pullback period — a meaningful retreat from earlier highs.

Grantham himself holds no bullish view on crypto. He has reiterated his long-standing position that Bitcoin is fundamentally worthless and ultimately headed to zero.

His preferred alternative allocations include non-US equities, fixed income instruments, and precious metals — assets he views as reasonably priced compared to American markets.

**The Counterargument**

Not everyone in the financial community shares Grantham's pessimism. Optimists point out that today's leading AI companies are generating real revenues and substantial profits — a stark contrast to the revenue-free dot-com darlings of the late 1990s. Federal Reserve Chair Jerome Powell has also weighed in, characterizing AI-related capital expenditure as genuine economic activity rather than speculative excess.

"They actually have earnings… These companies actually have business models and profits and that kind of thing. So it's really a different thing," Powell noted, drawing a clear distinction from the dot-com era.

**The Bottom Line for Crypto Holders**

Whether Grantham's timeline proves accurate or his warning arrives early once again, the underlying message for cryptocurrency investors is clear: Bitcoin's near-term trajectory is increasingly tied to the durability of the AI trade. Upcoming AI earnings seasons will serve as a critical test of whether market optimism is grounded in fundamentals — or built on something far more fragile.