Bridgewater Associates founder Ray Dalio cautioned on Tuesday that a bubble may be forming in large U.S. technology stocks fueled by the rapid adoption of artificial intelligence, but suggested it likely won’t burst until the Federal Reserve reverses its currently loose monetary stance.
“There are a lot of bubbles right now,” Dalio said on CNBC. “But bubbles don’t really burst until they’re popped by a tightening of monetary policy, etc.,” he added, noting that for now, the central bank is in an easing cycle (a Fed rate cut is expected to be announced tonight).
According to Dalio, this dynamic implies that markets could keep reaching new highs — not just while the Fed continues to reduce rates, but potentially until the tightening cycle resumes, which he believes might not happen before 2027.
Dalio highlighted that beyond the AI craze, the broader market has been “relatively weak” and highly concentrated.
He estimated that roughly 80% of total market gains are concentrated in major tech firms, creating what he called a “two-speed economy” — one where easier interest rates support weaker sectors, while a speculative bubble inflates elsewhere.
Dalio noted that such a divergence leaves monetary policy unable to balance both sides of the economy, making it more likely that the bubble continues to expand unchecked. He compared the current environment to past speculative peaks, saying it could resemble conditions from 1998–1999 or even 1927–1928.
“We may not know exactly if this is a bubble and when it will burst,” Dalio said. “But what we can say is that there is a significant risk.”
For now, U.S. mega-cap tech stocks continue to trade at historically elevated valuations, leaving investors with little margin for error should sentiment shift or growth expectations fail to materialize.