Grantham: Hype Overpowers Fundamentals, Value Wins Eventually

Jeremy Grantham warned that investor enthusiasm for artificial intelligence has pushed stock valuations to levels where fundamentals are secondary to narratives and momentum. The veteran investor said in an interview on the Long View podcast that the current environment mirrors previous speculative periods. Rising prices themselves become the primary justification for buying, he said.

Grantham acknowledged the pressure on professional investors to follow the market. “By the end of all this, I realized that if you’re a big firm with stockholders and all that good stuff, you can’t fight a bull market,” he said. “Keynes was right. He nailed it. … The stocks are going up–you recommend them.”

He pointed to the extraordinary valuations attached to companies promising enormous future opportunities from artificial intelligence. Uncertainty surrounds their eventual profitability, Grantham said. “So supply and demand being what it is, it’s hard to imagine the price won’t go up, and perhaps it will go up a lot. And in the end, the reality will come out, and this will turn out to be, of course, one of the landmark historical events that I so value in history looking back.”

The challenge for investors is that speculative assets can continue rising far longer than valuation models suggest. Momentum can overwhelm fundamentals for extended periods, rewarding buyers who ignore traditional measures of intrinsic value and punishing those who remain disciplined, Grantham said.