Dalio warned that the AI bubble was about to burst. What advice did he give on how to protect one's portfolio?
The billionaire believes that the high debt burden and the cost of financing are pushing the AI sector toward a tipping point
AI projects are funded by massive amounts of debt, Dalio notes / A screenshot from Dalio's online meeting with users of his chatbot
Artificial intelligence is a “classic bubble” that is nearing the point of bursting, said Ray Dalio, founder of Bridgewater Associates, at the Forbes Global CEO Conference in Singapore. According to the billionaire investor, rising interest rates and the need to convert accumulated capital into cash are contributing to this looming threat, Bloomberg reports.
Details
Dalio noted that AI projects are financed by massive amounts of debt, and as interest rates continue to rise, there will come a point when the bubble begins to burst. “We are in the part of the cycle that precedes this, but we are already approaching it. I think we’re close to it,” said the founder of Bridgewater.
He also cited other factors that could trigger a collapse of the AI market. Among them are taxes on large capital holdings and attempts by investors to lock in unrealized gains in cash.
“Everyone says, ‘I’m worth $1 billion,’ but try spending that money. To spend it, you have to sell off your wealth to get cash—and that’s exactly where the bubble usually bursts,” Dalio explains.
These comments came as tech giants are spending hundreds of billions of dollars on AI, increasingly relying on debt to fund these efforts, while the growth of the overall market is driven by only a small group of stocks, Bloomberg notes. Bond yields worldwide have reached multi-decade highs, which increases the cost of raising funds for large-scale investments in AI infrastructure.
Despite this, company valuations continue to rise: this week, optimistic expectations regarding the IT sector’s earnings reports pushed the S&P 500 and Nasdaq 100 indices to record highs.
Context
This isn’t the first time Dalio has issued such warnings: in November 2025, during an appearance on CNBC, he noted that the market was “in bubble territory,” but there was no “needle” yet capable of bursting it. However, at that time, the investor advised against selling off assets solely because of the looming threat, but recommended diversifying the portfolio with gold.
In June 2026, in an interview with Bloomberg, Dalio clarified that investors are confusing a bet on artificial intelligence technology itself with a bet on the stocks of AI companies, which may be overvalued. And in July, he reported that his own indicator shows the market is overheated at about 75% of the peak levels seen before the 1929 stock market crash and the dot-com crash in 2000.
This article was AI-translated and verified by a human editor
