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Grantham Warns of Market Correction Due to OpenAI, SpaceX IPOs

  //stocks-investing.news-articles.net/content/202 .. market-correction-due-to-openai-spacex-ipos.html
  Published in Stocks and Investing on Monday, February 23rd 2026 at 0:38 GMT by MarketWatch
      Locales: California, Texas, Delaware, UNITED STATES

Monday, February 23rd, 2026 - Veteran investor Jeremy Grantham, famed for accurately predicting major market crashes like the dot-com bubble and the 2008 financial crisis, is issuing a stark warning about the potential impact of highly anticipated IPOs from companies like OpenAI and SpaceX. Grantham, co-founder of the Boston-based asset management firm GMO, believes that the inclusion of these tech giants into the S&P 500 index could create a dangerous and unsustainable market dynamic, potentially leading to a significant correction.

Grantham's concerns aren't rooted in a dismissal of the innovation these companies represent. He acknowledges their potential for growth and disruption. However, he argues the current fervor surrounding them - fueled by speculative investment and unrealistic expectations - is reminiscent of the excesses seen during previous market bubbles. The sheer scale of anticipated investment, coupled with the companies' perceived quality, is creating a recipe for a 'nasty correction,' according to Grantham.

"It's the biggest thing I've seen since the dot-com bubble," Grantham stated in a recent interview. "The combination of the quality of the companies, the amount of money that's going to go into them, and the way the market is positioned... it's going to be a nasty correction."

The S&P 500 Index and the Weighting Problem

The S&P 500 is a market-capitalization weighted index, meaning that companies with larger market caps have a greater influence on the index's overall performance. The anticipated valuations of OpenAI and SpaceX, even before their IPOs, suggest they could rapidly become significant components of the index. This presents a unique challenge. If either, or both, were added to the S&P 500, index funds and ETFs tracking the index would be forced to buy shares, irrespective of their individual assessment of the companies' value. This automatic buying pressure would drive up prices, amplifying any existing speculative bubble.

This forced buying isn't limited to the initial inclusion. As the companies' market capitalization grows, their weighting within the index increases, requiring even more investment from index funds. This creates a self-fulfilling prophecy where passive investment, driven by index tracking, further inflates valuations, disconnecting them from underlying fundamentals. The concentration of investment in a relatively small number of companies - OpenAI and SpaceX - also raises concerns about systemic risk. If these companies were to underperform, the impact on the S&P 500, and therefore the broader market, would be disproportionately large.

Echoes of the Dot-Com Bubble

Grantham's comparison to the dot-com bubble is particularly pointed. That era was characterized by exuberant investment in internet-based companies, many of which lacked viable business models or realistic paths to profitability. Investors were captivated by the potential of the internet, often ignoring fundamental financial metrics. Similarly, OpenAI and SpaceX are seen as leaders in groundbreaking technologies - artificial intelligence and space exploration, respectively - leading to a similar wave of speculative investment. The narrative of limitless growth, unburdened by traditional valuation constraints, is strikingly similar.

Beyond OpenAI and SpaceX: A Broader Concern

While OpenAI and SpaceX are the most prominent examples, Grantham suggests the problem extends beyond these two companies. The current investment landscape is marked by a willingness to invest heavily in companies with disruptive technologies, often prioritizing growth over profitability. This trend is further exacerbated by low interest rates and abundant liquidity, providing ample capital for speculative ventures. The potential for misallocation of capital is significant, potentially hindering investment in more established and fundamentally sound businesses.

What Investors Should Do

Grantham's advice, consistent with his long-term investment philosophy, is caution. He urges investors to avoid chasing speculative gains and to focus on companies with proven track records, sustainable business models, and reasonable valuations. He advocates for a value investing approach, identifying undervalued assets that offer long-term growth potential. While acknowledging that timing the market is impossible, Grantham believes that investors should be prepared for a correction and to protect their portfolios from excessive risk. The current market environment, he warns, is ripe for disappointment, and investors who ignore the warning signs could suffer substantial losses.