Legendary Trader Tudor Jones: US Stocks Are Severely Overvalued, Bullish on Yen, Public Apology to Buffett

Legendary macro hedge fund manager and founder of Tudor Investment Corporation, Paul Tudor Jones, recently provided a systematic outline of his latest judgments on AI risks, stock market valuations, and trading opportunities in a podcast, with a level of candor rarely seen in the industry.

AI Threat: What He Heard Is More Scary Than What's Publicly Said

Jones revealed that about 18 months ago, he attended a small closed-door meeting with about 35 to 40 people, including top researchers from four major AI model companies.

He directly asked these people: How will the safety issues of AI be resolved in the end? The answer he received is still unforgettable to this day - the majority consensus is that "it may take 50 million to 100 million deaths from accidents before we take this matter seriously."

He attributes the root of AI's danger to the current development model: build, fail, iterate, and repeat. This approach has run through the history of human inventions, but never before has the cost of "failing" been billions of lives.

Jones emphasizes that the lack of AI regulation is the core issue. He cites nuclear weapons as an example: the atomic bomb was dropped in 1945, and within 18 months, the U.S. Congress established the Atomic Energy Commission. Yet after more than three years of AI development, substantive regulation is still lacking.

He calls on the President of the United States to take the lead in joining China and other major countries to build a regulatory framework, and he proposes a specific suggestion: to mandate watermarks on all AI-generated content, with violators facing criminal penalties, "this is the most important thing we can do right now."

This position is consistent with his previous public statements to Andrew Ross Sorkin on CNBC. In that interview, he clearly stated that AI poses an "existential threat" to humanity and directly called out: "President Trump must step in."

The Stock Market: A Market Cap/GDP Ratio of 252%, Never Seen in History

Jones's conclusion on market judgment is also not optimistic. He points out that the current ratio of U.S. stock market capitalization to GDP has reached 252%. For comparison: this ratio was about 65% at the time of the 1929 crash, around 85% to 90% in 1987, and only about 170% at the peak of the Internet bubble in 2000.

He does not necessarily believe that there is a bubble at present, but his tone is equally not relaxed - "We are very dependent on stocks in this country, excessively capitalized." He warns that if the stock market mean reverts to the average price-to-earnings level of the past 25 to 30 years, the decline could reach 30% to 35%.

Based on the current capitalization-to-GDP ratio, this would be equivalent to wiping out 80% to 90% of the U.S. GDP, capital gains tax would go to zero, the deficit would surge, the bond market would be impacted, forming a negative self-reinforcing cycle.

He also mentioned a worrisome structural variable: the total size of IPOs expected to go public in the next year is estimated to be equivalent to 5% to 6% of the market capitalization, while in the past decade, the U.S. stock market has net reduced about 2% of the floating market capitalization through share buybacks each year.

Once a large number of IPOs emerge, and the space for technology companies' share buybacks narrows due to capital expenditure pressure, there will be a fundamental reversal on the supply side of stocks.

He gave a concise valuation warning: historical data shows that investing when the S&P 500 P/E ratio is at 22 times results in a negative real return over the next 10 years.

The Most Favored Trade: Yen

On specific trading opportunities, Jones clearly expressed his bullish stance on the yen. He believes that the yen has been severely undervalued for a considerable time, and the real catalyst has just emerged - the new Prime Minister of Japan, Fumio Kishida.

Jones compares it to the early stages of Reagan, Thatcher, and Trump's second term, believing that when such leaders come to power, their national currencies often rapidly appreciate by about 10%.

He added a key figure: Japan's net external investment position is about $4.5 trillion, of which about 60% is in the United States, and most of it