Dalio says the AI bubble is close to bursting. How should investors prepare?
The billionaire says high debt levels and funding costs are pushing the AI sector toward a critical point
Dalio pointed out that a huge amount of debt is being taken out to fund AI / A screenshot from Dalio's online meeting with users of his chatbot
AI is a “classic bubble” that is nearing a bursting point, Bridgewater Associates founder Ray Dalio said at the Forbes Global CEO Conference in Singapore. Rising interest rates, along with the need to convert wealth into cash, are bringing that moment closer, the billionaire investor believes, Bloomberg reports.
Details
Dalio said a huge amount of debt is being taken out to fund AI, and as rates continue to climb, a point will come at which the bubble begins to burst. “We’re in the part of the cycle that is before that, but approaching that,” the Bridgewater founder said. “I think we’re close to that.” He identified other factors that could trigger the collapse of the AI market like wealth taxes and efforts to convert unrealized gains into cash.
“Everybody says ‘I’m worth a billion dollars’ but OK, try to spend that,” Dalio explained. “In order to spend that you have to sell wealth in order to get money — and so the bubble usually pricks at that.”
The comments come as tech giants spend hundreds of billions of dollars on AI, increasingly financing those investments with debt, while market gains remain concentrated in a handful of stocks, Bloomberg notes. Meanwhile, bond yields around the world have surged to their highest levels in decades, increasing the cost of funding the enormous investments needed to build AI infrastructure. Yet equity valuations continue to rise: this week, optimism over tech earnings propelled the S&P 500 and Nasdaq 100 indexes to fresh all-time highs.
Context
This is not the first time Dalio has issued such warnings. Appearing on CNBC in November 2025, he said the market was “in that territory of a bubble,” but that “we don’t have the pricking of the bubble yet.” He nevertheless advised against selling assets solely because of the looming threat, recommending instead that investors diversify their portfolios with gold.
In a June 2026 interview with Bloomberg, Dalio clarified that investors were confusing a bet on AI technology itself with a bet on stocks of AI companies, which could be overvalued. In July, he said his own indicator showed that the market was around 75% as overheated as it had been at the peaks preceding the 1929 stock-market crash and the dot-com collapse in 2000.
