Key Takeaways
- Billionaire investor and Bridgewater founder Ray Dalio stated that the stock market is “definitely in a bubble,” largely driven by excitement around artificial intelligence.
- Despite the bubble, Dalio advises investors not to sell their holdings yet, as there is no immediate catalyst causing it to pop.
- He suggests that future low returns are likely from the current market highs and recommends diversifying portfolios with assets like gold.
- Dalio’s comments come as AI chipmaker Nvidia soars on strong earnings, lifting the broader tech market.
Famed investor and Bridgewater Associates founder Ray Dalio has a clear message for investors: the market is in a bubble, but that doesn’t mean you should rush for the exits. Speaking on CNBC’s “Squawk Box,” the billionaire shared his perspective on the current AI-fueled market rally.
“The picture is pretty clear, in that we are in that territory of a bubble,” Dalio said. “But we don’t have the pricking of the bubble yet.”
The AI-Driven Surge
Dalio’s warning comes amidst a period of intense enthusiasm for artificial intelligence, which has propelled technology stocks to new heights. The technology-heavy Nasdaq Composite has climbed nearly 17% in 2025, largely thanks to gains in megacap tech stocks.
A prime example is AI chip leader Nvidia, which saw its stock surge over 5% following better-than-expected earnings and guidance. The company’s performance has consistently lifted the market, though some investors fear the AI trade could be overheating. However, Nvidia CEO Jensen Huang has dismissed bubble concerns, recently telling analysts, “we see something very different.”
Why Dalio Isn’t Selling
While identifying a bubble, Dalio cautioned against premature selling. “Don’t sell just because there’s a bubble,” he advised. He explained that timing is critical, and a bubble needs a specific event or “pricking” to collapse.
In his view, tighter monetary policy is unlikely to be the trigger this time. Instead, he suggested something like higher wealth taxes could potentially pop the bubble.
However, he warned investors about the long-term outlook from these elevated levels. “If you look at the correlations with the next 10 years’ returns, when you are in that territory, you get very low returns,” he noted.
Diversification is Key
So, what should an investor do? Dalio emphasized the importance of a well-diversified portfolio. He pointed to gold as a potential safe-haven asset to balance out risk. The precious metal, often seen as a store of value during uncertain times, has already surged to all-time highs this year.
By balancing equity holdings with alternative investments, market participants can better position themselves for the eventual market correction without missing out on potential near-term gains.