Ray Dalio Warns AI Bubble Mirrors 1929 and 2000 Market Crashes as SpaceX Loses $500 Billion

Legendary Hedge Fund Investor Ray Dalio Warns the AI Bubble Could Burst

"What they call a bubble is when the price goes up a lot and companies do very well and then it collapses. And that has implications for the economy and implications for the markets," Dalio said. What Dalio is talking about, albeit in generalized terms, has been happening with AI investment for a while. Total AI spending worldwide is expected to surge to $2.6 trillion by the end of 2026, as startups like OpenAI and Anthropic consider going public at trillion dollar valuations. OpenAI's CEO Sam Altman admitted that the AI industry had become a bubble last year, citing the titanic amount of money spent on building frontier models, data center development, and the pursuit of so-called "superintelligence." OpenAI is running a deficit -- its latest financials show $21 billion in losses against $13 billion in revenue, according to a leak obtained by the blogger Ed Zitron. Anthropic, according to documents given to the Wall Street Journal, claimed in May it's nearing its first quarter of profitability, though the Journal noted Anthropic's accounting methods were unorthodox and not the kind of standardized data usually pulled from public companies. SpaceX recently soared to the biggest IPO in history on the promise that it will fulfill data center demand by building the facilities in space. Elon Musk's company's stock has been humbled since its June IPO, crashing by around 50 percent of its debut at its lowest, and currently trading around $121 a share.

A crash coming? Ray Dalio warns AI rally looks like 1929 and 2000 bubbles

Bridgewater founder Ray Dalio warned the AI-driven market rally displays bubble-like traits seen before the 1929 crash and dot-com bust. He cited stretched valuations, rising rates and heavy stock issuance as key risks, echoing concerns from Jeremy Grantham and Goldman Sachs. Ray Dalio, the billionaire founder of Bridgewater Associates, has warned that the market rally driven by artificial intelligence is showing signs of a bubble similar to those seen before the 1929 crash and the dot-com bust in 2000. Dalio made the comments during an appearance on The Diary of a CEO with Steven Bartlett. Bartlett referred to investor Jeremy Grantham's warning that markets are facing "the biggest investment bubble in American history." Dalio agreed. Dalio said the current market has many features seen during earlier speculative periods. Investor excitement around AI has pushed valuations higher, while companies linked to the theme are attracting large amounts of capital. US MarketsPowered By As on 04 Aug 2026, 01:30 AM IST S&P 500 Top Gainers First Solar232.73(10.28%) Oracle141.85(9.22%) Axon Enterprise575.88(9.12%) Builders FirstSource72.48(9.09%) Gainers" S&P 500 Top Losers Coterra Energy32.56(-8.62%) Marriott International346.83(-6.97%) Fair Isaac1,045(-6.90%) eBay107.13(-6.03%) Losers" His warning comes as some of the biggest AI-linked companies are moving toward public markets. SpaceX has already completed what was described as the largest IPO ever, while Anthropic and OpenAI are reportedly moving toward valuations near or above $1 trillion. Also Read: 9 microcap multibaggers: How India's stock market minnows beat every major index in six months Dalio said rising interest rates and a wave of stock issuance are among the main risks that can burst a market bubble. In past cycles, markets have often become vulnerable when investors were willing to pay very high prices for fast-growing companies, just as more companies rushed to sell shares. SpaceX's market performance has added to those concerns. Since listing in June, the company has lost more than $500 billion in market value, according to CNBC. Its shares have posted four straight weekly losses and are more than 50% below their intraday high. The stock recently closed at $108.37, below its IPO price, although the company still has a market value of about $1.4 trillion. Its price-to-sales ratio remains in the 70s, while the company is burning billions of dollars each quarter and carries almost twice as much debt as cash. Dalio's comments add to a growing debate on whether the AI trade has moved too far, too fast. Supporters argue AI will reshape the economy and justify large investments. Critics say valuations have run ahead of earnings and cash flow. Grantham has also warned about bubble-like conditions. He has a long record of calling major market excesses, including the Japanese asset bubble, the dot-com bubble and the US housing bubble before the 2008 financial crisis. Strategists at Goldman Sachs have also flagged risks around tech valuations and earnings expectations. (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)