New Delhi: Billionaire investor Ray Dalio said on Wednesday that artificial intelligence (AI) is a classic bubble that is nearing a bursting point as rising interest rates and the need to turn wealth into cash put pressure on markets.
Speaking at the Forbes Global CEO Conference in Singapore, the Bridgewater founder said a large amount of debt was being raised to fund AI investment and that higher interest rates could eventually cause the bubble to burst.
“We are in the part of the cycle that is before that but approaching that,” Dalio said and added, “I think we are close to that.”
Technology companies have been spending hundreds of billions of dollars on AI, with an increasing share of the investment financed through debt. At the same time, market gains have become concentrated in a small number of technology stocks.
Higher bond yields around the world have also increased the cost of financing the investment needed to build AI infrastructure.
Despite these concerns, equity valuations have continued to rise, with optimism over technology earnings helping push the S&P 500 and Nasdaq 100 indexes to record highs this week.
Dalio, who has previously warned about an AI bubble, said other factors could also trigger a market decline, including wealth taxes and efforts to convert unrealised gains into cash.
“Everybody says ‘I’m worth a billion dollars’ but OK, try to spend that,” Dalio said.
He said people would need to sell assets to turn their wealth into cash, adding that this process can put pressure on bubbles and cause them to burst.
Earlier in June, he warned that the United States is entering a particularly risky period between the 2026 midterm elections and the 2028 presidential election due to widening fiscal deficits, rising debt and falling demand for US government bonds.
“I believe we are currently on the brink,” Dalio wrote on X and added that the monetary situation was becoming increasingly threatening.
(IANS)
