Ray Dalio says don’t sell on AI bubble fears, but prepare for lower returns

The Bridgewater Associates founder agrees with the general consensus that stocks are in some form of bubble right now, arguing that there are vulnerabilities in the economy. He added that this does not mean it is time to get out of the play.

“Don’t sell just because there’s a bubble,” Dalio said in an interview with CNBC broadcast yesterday. “But if you look at the correlations with the next 10-year returns, when you are in that region, you get very low returns.”

Other prominent figures in AI and markets believe that even if the industry is in bubble territory, it is not necessarily the end of the world. For example, Jamie Dimon, CEO of JPMorgan Chase, compared today’s abundance of AI to the early days of the Internet, calling it “all in all, a bonus,” with Google, YouTube, and Meta eventually emerging and proving viable. He speaks in Luck At the Most Powerful Women conference in October, he said he was somewhat cautious about conditions in the current market, but urged people not to dismiss all AI as mere speculative madness. “You can’t look at AI as a bubble, although some of these things may be in the bubble. Overall, it’s likely to come to fruition.”

In fact, even Alphabet CEO Sundar Pichai is realistic about superficial speculation, recently saying that while this is an “extraordinary moment” there is some “irrationality” in the AI ​​boom. If such a bubble bursts, he told the BBC: “I think no company will be immune, including us.”

Dalio is 76 years old and has a net worth of US$15.4 billion ForbesHe argues that the bubble can burst, but it will need stimulation to do so. “I think you have to say it’s not sustainable,” he added. “Then you have to go into timing – what punctures the bubble?” There is good news here: there would usually be tight monetary policy, but “we won’t get that now,” Dalio adds.

What may cause such a bubble is when people who made a fortune in the bubble decide that they want the money for themselves. “The need for cash is always what busts the bubble, because… you can’t spend wealth, you have to sell wealth so you can buy the things you need, or pay the bills you have,” Dalio added. “I think the picture is pretty clear that we’re in that bubble zone, we’re in that bubble zone, but we haven’t quite pricked the bubble yet.”

Risk aware

Heading into 2026, Mark Highfill, chief investment officer at UBS, warned investors that although the outlook for stocks remains positive, they should be aware of overexposure to risks surrounding artificial intelligence.

As he wrote in his monthly note to clients yesterday, AI has the potential to deliver productivity improvements in the medium term to help economies achieve a new era of growth. However, “much will depend on investors’ willingness to continue funding it, the ability of technology leaders to monetize it, and the world’s ability to provide the energy needed to power it.”

“Strong capital expenditure and adoption should lead to further gains in 2026, although investors should be aware of bubble risks,” he warned.