Ray Dalio, the 76-year-old founder of Bridgewater Associates and one of the world’s most influential hedge fund managers, says the rapid surge in artificial intelligence stocks shows all the signs of a growing market bubble. However, he cautions investors not to panic or dump their AI holdings too quickly.
In a recent conversation with CNBC, Dalio acknowledged that the excitement pouring into AI companies — especially those building next-generation computing infrastructure — has inflated valuations far beyond traditional financial metrics. The rush to invest is reminiscent of past periods where market optimism overwhelmed rational judgment. Still, Dalio emphasizes that a bubble does not automatically signal an imminent crash.
“Don’t sell just because there’s a bubble,” Dalio explained. “Historically, when markets enter this territory, the next 10 years usually produce lower returns. But that doesn’t mean the decline is happening tomorrow.”
AI Mania and the Roots of a Modern Market Bubble
Dalio defines a bubble as a period when asset prices shoot up much faster than the fundamentals of the companies behind them. By those standards, the current AI environment is textbook. Massive investment capital is flowing into data-center construction, chip development, cloud infrastructure, and AI model training. Companies like Nvidia, AMD, and major cloud providers have become the center of market attention.
According to Dalio, bubbles typically remain inflated until an external shock forces a reversal. Historically, these shocks include monetary tightening, geopolitical shifts, economic contractions, or tax policy changes. Today, he doesn’t see such catalysts materializing in the immediate future — meaning the AI wave may continue longer than skeptics expect.
“The bubble pops when investors need cash,” Dalio noted. “People sell because they have bills to pay, not necessarily because they think prices are too high. Right now, I don’t see that pressure building.”
Diversification Still Matters — and Dalio Recommends Gold
The billionaire investor has long promoted diversification as a core portfolio strategy. Recently, he suggested that investors allocate roughly 15% of their holdings to gold, which has hit record highs. Prices climbed above $4,380 per troy ounce last month, driven by global uncertainty, currency concerns, and growing demand from central banks.
Dalio argues that gold provides stability when markets become overly speculative. In his view, a mix of hard assets, cash reserves, and global equities remains essential — especially during technological booms where enthusiasm often runs ahead of reality.
Nvidia’s Jensen Huang Pushes Back on Bubble Concerns
Dalio’s comments arrive as Nvidia CEO Jensen Huang strongly disputes the notion that AI is in a bubble. In an earnings call with analysts, Huang argued that AI is powering both transformative new applications and upgrades to older computing systems, making demand more sustainable than critics believe.
He emphasized three growth drivers: AI being integrated into existing software, the migration of legacy systems to advanced GPUs, and the rise of autonomous AI agents capable of running with minimal human input. According to Huang, these forces will require immense computing power — and Nvidia is uniquely positioned to supply it.
That confidence is reflected in Nvidia’s financial results. The company reported record revenue of $57 billion for the quarter ending October 26, up 22% from the previous quarter and 62% year-over-year. Demand for AI chips, cloud GPUs, and enterprise-level infrastructure continues to exceed supply.
Short-Term Caution, Long-Term Perspective
Dalio stresses that AI’s long-term impact on global productivity and innovation is undeniable. However, that doesn’t change the near-term reality that valuations may not be sustainable. The key message to investors: stay balanced, stay diversified, and avoid emotional decision-making.
“The picture is clear,” he said. “We’re in bubble territory — but the bubble hasn’t been pricked.”
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