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Ray Dalio tells Bloomberg TV the AI market is in a bubble, warns valuations lack cash backing, cites government deficits and bond stress, urges investors to expect lower returns
Billionaire investor Ray Dalio (Image: Reuters/File)
Since the release of AI chatbot ChatGPT, developed by AI research firm OpenAI, the world has changed a lot. It is now divided into pre- and post-AI (Artificial Intelligence) worlds. The watershed moment has also triggered a global AI race among global tech firms, mostly US-based, to dominate the emerging market where they have committed their investment and research to develop AI function models and an entire infrastructure around it.
Global investors, too, have shifted their strategies and begun either shifting or investing in the AI ecosystem at an accelerating pace. AI-related companies, including tech companies and chip-making firms, have gained phenomenally in recent times. It all is so huge and dramatic that some associated it with the ‘dot-com’ bubble, and warned that it may burst in the near future.
One of the new proponents that the AI bubble may burst is none other than Bridgewater Associates founder Ray Dalio.
In a conversation with Bloomberg TV on Wednesday, Dalio said that AI market is in a bubble and will burst when investors more to convert their wealth into crash.
Dalio said that the prick is the converting of wealth into money. He noted that AI firms can achieve high valuations, but they lack the cash to back them.
“All great technology changes produce bubbles,” Dalio told Bloomberg TV on Wednesday. “Nobody can get it exactly right. You have to either spend a ton of money to capture your market share and don’t worry about whether it’s too much or not, or you don’t spend enough money and you lose your market share.”
He also pointed to government deficits and bond market stress as contributing factors.
Dalio cautioned against panic selling and suggested that investors prepare for lower returns.
What Happened During Dot-Com Bubble?
In the late 1990s and early 2000s, the internet companies exploded in leaps and bounds due to the popularity of the internet. Investors rushed to invest in any company with a “.com” website.
Many internet startups had little revenue, no profits, and sometimes no clear business model. Despite that, their valuations soared because investors believed the internet would change everything.
During 1995 to 2000, the tech-heavy index Nasdaq composite rose more than 400 per cent.
In 2000, the reality hit hard. Investors began questioning whether these companies could actually make money. So, investors began pulling the money and many internet startups went bankrupt.
The Nasdaq lost nearly 80% of its value between 2000 and 2002.
About the Author
Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the I…Read More
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