Ray Dalio Warns AI Stock Bubble May Burst

Ray Dalio, a billionaire investor and hedge fund manager, warned that an artificial intelligence stock bubble has formed and is approaching a breaking point. Speaking at a recent conference, Dalio identified rising debt loads and elevated interest rates as the primary risks that could destabilize the market.

Dalio noted that even cash-rich technology companies are increasing their borrowing to fund AI initiatives. This trend becomes increasingly risky as the Federal Reserve System raises interest rates, creating pressure on companies to service their debt. He stated, "We’re in the part of the cycle that is before that but approaching that," regarding the potential for the bubble to pop.

Market volatility is currently most evident in tech-heavy investments, such as the State Street Technology Select Sector SPDR ETF, which relies heavily on the performance of Microsoft, Apple, and Nvidia. Dalio suggested that the market is further pressured by investors selling stocks to lock in gains and shifting toward bonds as yields rise.