Ray Dalio on the AI bubble nearing 1929, 2000 levels and the lesson people always forget: ‘wealth is not the same as money’
"You see a lot of people getting wealthy but you can't spend the wealth," the Bridgewater Associates founder told Diary of a CEO.
Ray Dalio, founder of Bridgewater Associates, warned that the current market environment resembles the bubbles of 1929 and 2000. This comes as SpaceX has gone public in the largest IPO ever, and AI firms like Anthropic and OpenAI are nearing trillion-dollar valuations. Market historians consider speculative issuance surges as a bubble's warning sign.
Dalio agreed with Jeremy Grantham's assessment that markets are facing "the biggest investment bubble in American history." Grantham's framework identifies a "bubble within a bubble," with the super-bubble inflating dangerously since 2021, followed by a decline in January 2022 before AI's arrival reversed the trend. Dalio emphasized that wealth is not the same as money, with wealth often being paper wealth that can't be spent until sold.
He provided a thought experiment: buying an AI company's stock for $100, borrowing against that wealth, and seeing the price collapse to $25 if the market turns against the investment. Wall Street's research shops are echoing Dalio's warnings, with Goldman Sachs and Apollo's Torsten Slok noting signs of an earnings bubble in the tech sector, and BCA Research's Peter Berezin arguing that the AI trade is primarily an earnings bubble.
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