AI market shows signs of a bubble, and it will eventually burst - billionaire Ray Dalio

Billionaire Ray Dalio, founder of Bridgewater Associates, said that the booming artificial intelligence market is showing signs of a bubble that will eventually burst. At the same time, he said, investors are confusing betting on artificial intelligence with betting on AI stocks.

"People are betting on technology - and I'm willing to bet on it myself - but they think buying stocks is betting on technology. However, it's different because stocks can be expensive," Dalio told Bloomberg TV.

According to him, "all great technological change creates bubbles." "Nobody can do it absolutely right. You either have to spend a bunch of money to grab your market share and not worry about whether it's too much or not, or you don't spend enough money and lose market share," the billionaire said.

Bubbles burst when it's time to lock in investment returns, Dalio said, while concurrently expressing concerns about the profitability of AI companies. "Bursting a bubble is converting wealth into money," the billionaire said. In his view, today's AI-driven market is "going down exactly that path, even though it's a great technology."

Ray Dalio's comments came amid a large influx of capital into the technology sector. The excitement around the AI boom has pushed stock indices to all-time highs, provoking discussions on Wall Street about whether the current market value of companies matches their fundamentals, Business Insider notes.

The economic justification for the use of AI technology has not yet been found, according to Goldman Sachs analyst Jim Covello. He says businesses are investing a lot of money in the technology, but the amount of profit needed to justify such spending is also growing. "Over the last couple of years, we've gotten further away from that understanding [of economic benefit] rather than closer to it," Covello argues.

Nvidia CEO Jensen Huang, seeking to allay fears, this week claimed "insane" returns for investors willing to bet on the AI boom.

This article was AI-translated and verified by a human editor