Ray Dalio Warns: "Approaching the Point Where the AI Bubble Bursts"

▲ Ray Dalio, founder of Bridgewater Associates

Ray Dalio, founder of Bridgewater Associates, the world's largest hedge fund, has warned that artificial intelligence (AI) is a "classic bubble" and that "rising interest rates and the need to convert wealth into cash are bringing us closer to the point where the bubble will burst."

According to Bloomberg on October 7, Dalio said at the Forbes Global CEO Conference held in Singapore that day, "Massive amounts of debt are being raised to fund AI. If interest rates continue to rise, we will reach the point where the bubble bursts."

Dalio said, "We are at a point in the cycle before reaching that moment, and in my opinion, we are approaching that point closely."

These remarks come as Big Tech companies are pouring hundreds of billions of dollars into AI infrastructure capital expenditures, increasingly relying on debt financing to fund those expenses.

According to Dalio, market gains are concentrated in a small number of stocks, global bond yields have surged to their highest levels in decades, and the massive investments required to build AI infrastructure are driving up financing costs.

Nonetheless, optimism over tech company earnings has driven the S&P 500 and Nasdaq 100 indices to record highs, continuing to push stock valuations higher.

Dalio, who has long warned of an AI bubble, stated that there are other issues that could trigger a bubble collapse as well.

These include the imposition of wealth taxes and the need to convert unrealized gains into cash.

Dalio asserted, "Everyone says, 'I have $1 billion in assets,' but try actually spending that money. To spend it, you have to sell off wealth to raise cash. Bubbles generally start to burst around that point."

(Photo: Getty Images)

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