Ray Dalio warns AI boom is looking like 1929 and dot-com bubble: ‘Technology is real, but prices are the problem'

Billionaire investor and Bridgewater Associates founder Ray Dalio has warned that the artificial intelligence boom is beginning to show signs of a financial bubble, comparing current market conditions with the periods before the 1929 market crash and the 2000 dot-com collapse.

Speaking to Bloomberg, Dalio said major technological revolutions often create speculative bubbles because investors confuse the long-term potential of a technology with the short-term value of companies linked to it.

“All great technology changes produce bubbles,” Dalio said, adding that investors often believe “buying the stocks is betting on the technology,” even though the stocks themselves can become extremely expensive.

Dalio stressed that he is not questioning the potential of AI. Instead, he warned that the economics behind the current investment cycle may not yet justify the valuations being created.

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“The pricking of the bubble happens when there’s a need for wealth to be sold to get the money,” Dalio said, referring to the moment when investors start converting paper gains into cash and companies are forced to prove actual returns.

The AI industry has witnessed an unprecedented investment race, with major technology companies spending hundreds of billions of dollars on data centres, chips and cloud infrastructure. However, concerns are growing over whether AI revenues can grow quickly enough to justify this level of spending.

According to industry estimates, AI-related capital expenditure is expected to reach hundreds of billions of dollars annually, driven by demand for advanced computing infrastructure. Critics argue that many companies are still struggling to generate meaningful profits from AI deployments.

Several studies have highlighted the challenge of converting AI adoption into financial returns, with many enterprise projects failing to produce measurable gains despite aggressive experimentation.

Dalio compared the current situation with the internet boom of the late 1990s, when the technology ultimately changed the world but many highly valued companies collapsed after investor expectations exceeded business reality.

“The technology is wonderful,” Dalio indicated, but warned that innovation and investment returns are not always the same thing.

The rapid rise of AI-linked companies, especially chipmakers and cloud infrastructure providers, has created one of the most crowded investment themes on Wall Street. Companies are racing to build AI capacity to avoid falling behind competitors, leading to a surge in spending.

Dalio also pointed to geopolitical risks, particularly supply chain dependence around advanced semiconductor manufacturing. He warned that any disruption in critical chip supplies could create significant pressure on AI-related stocks and broader markets.

The billionaire investor said the biggest winners from AI may not necessarily be those buying companies at extreme valuations, but those who successfully use the technology to increase productivity and create sustainable businesses.

For Dalio, the lesson from history is clear: transformative technologies can survive and reshape economies, even when the financial bubbles surrounding them burst.