Ray Dalio, the billionaire founder of Bridgewater Associates, has warned that the market rally driven by artificial intelligence is showing signs of a bubble similar to those seen before the 1929 crash and the dot-com bust in 2000. Dalio made the comments during an appearance on The Diary of a CEO with Steven Bartlett. Bartlett referred to investor Jeremy Grantham’s warning that markets are facing "the biggest investment bubble in American history." Dalio agreed.
Dalio said the current market has many features seen during earlier speculative periods. Investor excitement around AI has pushed valuations higher, while companies linked to the theme are attracting large amounts of capital.
His warning comes as some of the biggest AI-linked companies are moving toward public markets. SpaceX has already completed what was described as the largest IPO ever, while Anthropic and OpenAI are reportedly moving toward valuations near or above $1 trillion.
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Dalio said rising interest rates and a wave of stock issuance are among the main risks that can burst a market bubble. In past cycles, markets have often become vulnerable when investors were willing to pay very high prices for fast-growing companies, just as more companies rushed to sell shares.
SpaceX’s market performance has added to those concerns. Since listing in June, the company has lost more than $500 billion in market value, according to CNBC. Its shares have posted four straight weekly losses and are more than 50% below their intraday high.
The stock recently closed at $108.37, below its IPO price, although the company still has a market value of about $1.4 trillion. Its price-to-sales ratio remains in the 70s, while the company is burning billions of dollars each quarter and carries almost twice as much debt as cash.
Dalio’s comments add to a growing debate on whether the AI trade has moved too far, too fast. Supporters argue AI will reshape the economy and justify large investments. Critics say valuations have run ahead of earnings and cash flow.
Grantham has also warned about bubble-like conditions. He has a long record of calling major market excesses, including the Japanese asset bubble, the dot-com bubble and the US housing bubble before the 2008 financial crisis.
Strategists at Goldman Sachs have also flagged risks around tech valuations and earnings expectations.
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