Ray Dalio Warns AI Market Is a 'Classic Bubble' Nearing a Burst

Speaking at the Forbes Global CEO Conference in Singapore, the Bridgewater founder said substantial debt was being raised to finance AI-related investments, leaving markets increasingly vulnerable to rising borrowing costs.

"We are in the part of the cycle that is before that but approaching that," Dalio said, adding that he believed markets were getting close to the point where the bubble could burst.

Technology companies have committed hundreds of billions of dollars to AI development and infrastructure, with a growing portion of that spending being supported by debt. At the same time, a relatively small group of technology companies has accounted for a significant share of recent market gains.

Rising bond yields globally have further increased the cost of financing large-scale investments required to build AI infrastructure. Despite these concerns, equity valuations have continued to climb, with expectations of strong technology earnings helping drive the S&P 500 and Nasdaq 100 to record levels this week.

Dalio, who has previously raised concerns about excessive AI valuations, said a market downturn could also be triggered by other developments, including wealth taxes and policies that encourage investors to convert unrealised gains into cash.

He pointed out that paper wealth does not necessarily translate into readily spendable money and said investors would have to sell assets to realise their gains. Such selling, he argued, could place additional pressure on highly valued markets and contribute to the unwinding of bubbles.

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, rising 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.