AI Is a ‘Classic Bubble’ Nearing Burst, Says Ray Dalio

Speaking at the Forbes Global CEO Conference in Singapore, the founder of Bridgewater Associates said significant amounts of debt were being raised to finance AI investments, making the sector increasingly vulnerable to higher borrowing costs.

"We are in the part of the cycle that is before that but approaching that," Dalio said, adding, "I think we are close to that."

Technology companies have committed hundreds of billions of dollars to AI development, with a growing portion of that investment being financed through borrowing. At the same time, market gains have become increasingly concentrated among a relatively small group of technology companies.

Rising bond yields globally have further increased the cost of financing the infrastructure required to support the rapid expansion of AI.

Despite these concerns, equity valuations have continued to climb. Optimism surrounding technology earnings has helped push the S&P 500 and Nasdaq 100 indexes to record levels this week.

Dalio, who has previously raised concerns about an AI-driven market bubble, said other developments could also contribute to a market downturn. He pointed to potential wealth taxes and efforts to convert unrealised asset gains into cash as possible sources of pressure.

"Everybody says 'I'm worth a billion dollars' but OK, try to spend that," Dalio said, explaining that people would have to sell assets to turn their wealth into cash. Such selling, he argued, can place additional pressure on asset bubbles and contribute to their eventual reversal.

Dalio had also warned in June that the United States was entering a particularly risky period between the 2026 midterm elections and the 2028 presidential election, citing widening fiscal deficits, increasing government debt and weakening demand for US government bonds.

"I believe we are currently on the brink," Dalio wrote on X at the time, warning that the country's monetary situation was becoming increasingly concerning.