Ray Dalio Says AI Is a Bubble. His Advice: Don’t Panic, Just Prepare.

Artificial intelligence has become the market’s favourite obsession, and according to Ray Dalio, it is starting to look suspiciously like a bubble. The Bridgewater founder says investors should acknowledge that reality, but not sprint for the exits.

“Don’t sell just because there’s a bubble,” Dalio said on CNBC. His point was not that the boom is over, but that the next decade’s returns tend to look thin when markets enter this kind of territory. In other words, stay invested, but sharpen your expectations.

The comments landed on a day when Nvidia surged more than 5% after posting another round of blockbuster earnings. Jensen Huang dismissed talk of froth, telling analysts that he sees “something very different” from typical bubble conditions. Wall Street seemed willing to agree, at least for the moment, as the rally lifted broader markets and eased fears that the AI trade was running out of steam.

The Nasdaq Composite is up nearly 17% this year, fuelled by megacap tech names riding the AI wave. Dalio does not dispute the fundamental excitement, but argues that bubbles only burst when something punctures them. He does not think tighter monetary policy will do it. A more plausible trigger, he suggests, could be rising wealth taxes if political pressure intensifies.

“We are in that territory of a bubble,” he said. “But we don’t have the pricking of the bubble yet.”

Dalio’s prescription is familiar but timely. Diversify, especially into assets that behave differently when markets overheat. Gold is his go-to example, and the metal has hit fresh record highs this year as investors hedge against turbulence.

The bigger question is whether the AI boom has the staying power of the early internet or the fragility of the late 1990s. For now, Dalio is not urging anyone to step aside. He is telling investors to enjoy the ride, but keep one hand on the safety rail.