Ray Dalio Says AI Bubble Forming But Hold Positions

Ray Dalio, founder of Bridgewater Associates, warned Thursday that excessive investment and enthusiasm are “definitely” forming an AI bubble, though he cautioned investors against panic selling. Speaking on CNBC, the 76-year-old billionaire acknowledged that AI stock prices have surged far above underlying business values, but investors should understand the broader implications rather than react impulsively.

Understanding Bubble Dynamics

Dalio explained that while bubbles do exist, they typically persist until external shocks force them to burst. He noted that changes in monetary policy or increased wealth taxes could trigger a collapse, but these conditions aren’t currently present. The key factor that historically pricks bubbles, according to Dalio, is when investors face cash needs and must liquidate positions. “The picture is pretty clear, in that we are in that territory of a bubble. But we don’t have the pricking of the bubble yet,” he stated.

Portfolio Strategy During Uncertain Times

Rather than abandoning AI investments, Dalio recommended diversifying portfolios with protective assets like gold, suggesting approximately 15% allocation. Gold prices recently hit record highs, reaching $4,381.58 per troy ounce. Dalio’s pragmatic approach emphasizes that investors expecting significant long-term gains in bubble environments will likely face disappointment.

His comments contrast with Nvidia CEO Jensen Huang’s more optimistic outlook. Despite acknowledging bubble discussions, Huang sees unique dynamics—new AI use cases emerging, infrastructure upgrades across industries, and increased computing demands from AI agents—positioning Nvidia as the sole company addressing all three factors. Nvidia’s $57 billion third-quarter revenue, up 62% year-over-year, supports this narrative.