Ray Dalio Says We’re in an AI Bubble, But Investors Shouldn’t Rush to Sell Yet
The 76-year-old billionaire founder of Bridgewater Associates says bubbles tend to persist until external shocks force them to burst.
Key Takeaways
- Ray Dalio, 76, is the billionaire founder of hedge fund Bridgewater Associates.
- Dalio says an AI bubble is forming, but investors don’t have to sell AI stock immediately.
- He says investors should understand that long-term gains in these situations will likely be small.
Hedge fund founder Ray Dalio says excessive enthusiasm and investment in AI is “definitely” forming a bubble in the market — but that doesn’t mean investors need to give up their positions or sell their stock right away.
The 76-year-old billionaire founder of Bridgewater Associates agrees that AI stocks are in some form of a bubble, meaning that prices have risen rapidly to levels far above what the underlying businesses are worth, and there has been a rush of investment into building AI infrastructure. However, he says investors shouldn’t rush to sell stocks, but understand that expected long-term gains in these situations will likely be small.
“Don’t sell just because there’s a bubble,” Dalio said on Thursday in an interview with CNBC. “But if you look at the correlations with the next 10 years’ returns, when you are in that territory, you get very low returns.”
Related: Ray Dalio Wants People to Ask Him Questions on Social Media So He Can Train His AI Clone
Dalio says that bubbles tend to persist until external shocks, like changes in monetary policy or higher wealth taxes, force them to burst — a scenario he does not see materializing in the near future. According to Dalio, the need for cash is “always” what pricks the bubble — when investors have to sell stock to pay the bills.
“The picture is pretty clear, in that we are in that territory of a bubble,” Dalio told CNBC. “But we don’t have the pricking of the bubble yet.”
Dalio recommended diversifying investment portfolios with investments like gold. Last month, he recommended allocating around 15% of an investment portfolio to gold. Gold prices have reached record highs recently, reaching an all-time high of $4,381.58 per troy ounce last month.
Related: Billionaire Ray Dalio Credits One Daily Habit With All of His Success
Dalio’s comments arrive as Nvidia CEO Jensen Huang said on Wednesday in an earnings call with analysts that while “there’s been a lot of talk about an AI bubble,” he sees “something very different.”
According to Huang, AI isn’t only being incorporated into current applications but will also unlock new use cases. He also said that areas like engineering and search systems are transitioning to Nvidia’s chips because they want to upgrade their older computing infrastructure to new systems. Lastly, Huang said that AI agents, or AI that can run with little user input, will need even more computing power.
Nvidia is the only company that can address all three dynamics, and each one “will contribute to infrastructure growth in the coming years,” according to Huang.
Despite concerns of an AI bubble, Nvidia reported record revenue on Wednesday for the third quarter ending October 26. The AI chipmaker’s $57 billion revenue was up 22% from the previous quarter and up 62% from a year ago.
Key Takeaways
- Ray Dalio, 76, is the billionaire founder of hedge fund Bridgewater Associates.
- Dalio says an AI bubble is forming, but investors don’t have to sell AI stock immediately.
- He says investors should understand that long-term gains in these situations will likely be small.
Hedge fund founder Ray Dalio says excessive enthusiasm and investment in AI is “definitely” forming a bubble in the market — but that doesn’t mean investors need to give up their positions or sell their stock right away.
The 76-year-old billionaire founder of Bridgewater Associates agrees that AI stocks are in some form of a bubble, meaning that prices have risen rapidly to levels far above what the underlying businesses are worth, and there has been a rush of investment into building AI infrastructure. However, he says investors shouldn’t rush to sell stocks, but understand that expected long-term gains in these situations will likely be small.
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