Jeremy Grantham on How to Tell If a Bubble Is About to Burst

In June 2025, SpaceX was worth $2.7 trillion on roughly $20 billion of revenue, with no earnings. Its price-to-sales ratio exceeded 100. That single number—a company with no profits selling for more than a hundred times its sales—is the kind of fact that makes market historian Jeremy Grantham, co-founder of GMO and author of The Making of a Permabear, sit up and pay attention. For Grantham, the current AI frenzy is not just another speculative episode. It is, he argues, one of the two greatest bubbles in financial history, comparable only to the 19th-century railroad mania.

What Makes a Great Bubble

Grantham has spent 50 years studying the making and breaking of great bubbles, which he considers "the only thing that really matters" in markets. His framework is precise. A true bubble requires three ingredients: decent economic times, easy money, and a "fabulous idea" so obviously important that everyone can see it. The railroads were one such idea—everyone knew they would change the world, everyone piled in, and everyone lost their money. Out of the ashes, the tracks remained, and the world did change. The internet was another, with Amazon famously falling 92% before rising to dominate retail.