Billionaire investor Ray Dalio has warned that investors are confusing bets on artificial intelligence with bets on AI stocks.
“People are betting on technology. I bet on technology, but they think buying stocks is betting on technology. That’s different because stocks can be expensive,” the Bridgewater Associates founder said Wednesday in an interview on Bloomberg TV.
His comments come as investors continue to pour money into companies tied to the AI boom, sending stock markets to record highs and fueling debate over whether valuations are out of touch with fundamentals.
This dynamic is often seen during major technological innovations.
“Every major technology change creates a bubble,” he said.
That’s because companies competing for superiority in new technologies face difficult choices, Dalio said.
He said, “You either have to spend a lot of money to gain market share and don’t care if it’s too much, or you don’t spend enough money and lose market share.”
However, bubbles do not burst just because prices become excessive. Rather, the real risk arises when investors need cash and are forced to sell assets.
“You can’t spend wealth. To get money, you have to sell wealth, because all you can do is spend money,” Dalio said.
Successful market timing requires understanding bubbles and recognizing what can force investors to sell.
“The stabbing is turning wealth into money,” Dalio said.
Dalio’s latest comments echo concerns he raised earlier this year about the gap between technological advances and investment returns.
He told the “All-In Podcast” in March that investors often confuse bets on breakthrough technology with bets on companies looking to profit from it.
Dalio pointed to the dot-com era, when the Internet transformed the world, but many of the companies associated with that boom eventually went bankrupt.