Ray Dalio Reportedly Says We’re 80% Into A Full-Blown ‘AI Bubble’ – Uses Nvidia As Example On Market Risks

• In an interview with CNBC, Ray Dalio said the U.S. is roughly 80% into a market bubble similar to 1929 and 2000.
• He said the focus on Nvidia showcases how a single stock can concentrate risk and amplify bubble dynamics.
• Dalio added that monetary tightening or wealth taxes could force asset sales, triggering corrections.

Bridgewater founder Ray Dalio reportedly said on Thursday that the U.S. economy is approximately 80% of the way into a bubble similar to those that preceded the 1929 crash and the dot-com collapse in 2000.

U.S. equities were recovering in pre-market trade on Friday after Nvidia (NVDA) reported its third-quarter (Q3) earnings, which beat market estimates and eased concerns around an ‘AI bubble’ forming. The SPDR S&P 500 ETF (SPY) was up 1.6%, the SPDR Dow Jones Industrial Average ETF (DIA) gained more than 1%, and the Nasdaq-100 tracking Invesco QQQ Trust (QQQ) climbed more than 2%. Retail sentiment around QQQ on Stocktwits continued to trend in ‘bearish’ territory.

Ray Dalio’s Bubble Indicator

In an interview with CNBC, Dalio explained that his bubble indicator, which tracks data going back to 1900, uses multiple metrics, including leverage, money supply, and wealth concentration, to assess market vulnerability. 

“These indicators show that we’re about 80% of where we were in those two historical periods. That doesn’t mean the move is over, because bubbles have to be pricked,” Dalio said. He stated that it can only be predicted once an investor understands who holds the assets and the risks associated with leveraged positions.

When Will The Bubble Burst?

According to Dalio, a bubble arises when wealth creation outpaces cash availability. This can occur through high valuations, such as selling $50 billion of stock at a trillion-dollar valuation, or other mechanisms that inflate asset prices. He noted that “bubbles don’t happen because of good estimates of the future – they happen because of the need for cash.” Factors like wealth taxes or monetary tightening can force asset sales, triggering corrections.

Strong Hands Vs. Weak Hands

Dalio said the difference between strong and weak hands is that strong hands consist of investors using their own money with long-term intentions, while weak hands are leveraged and more likely to sell under pressure. Concentration of wealth in a small segment of the population, combined with leverage, is a key ingredient of a bubble.

He gave Nvidia (NVDA) as an example of how a single stock can dominate bubble dynamics. “We’re talking about one stock in the stock market bubble,” Dalio said. “Such a small percentage of the economy, concentrated wealth, and leveraged positions amplify risk. Strong hands are investing their own money. Weak hands are leveraged and can trigger volatility.”

Nvidia’s stock gained more than 5% in pre-market trade and was the top trending ticker on Stocktwits. Retail sentiment around the AI bellwether trended in ‘extremely bullish’ territory as chatter rose to ‘extremely high’ from ‘high’ levels over the past day.

1% Of Dalio’s Portfolio Is Bitcoin

Dalio disclosed that around 1% of his portfolio is allocated to Bitcoin (BTC) but warned that it is unlikely to become a reserve currency for major nations due to traceability and potential vulnerabilities, including quantum computing threats. In contrast, he praised gold as a secure, non-fiat asset independent of third-party control.

“The advantage of gold is that it’s an asset you can hold, and you’re not dependent on someone to provide it. That’s why it remains the most popular non-fiat currency,” Dalio said.

Bitcoin’s price edged 0.2% lower in early morning trade. On Stocktwits, retail sentiment trended in ‘bearish’ territory over the past day while chatter was at ‘high’ levels.

Read also: MSTR, BMNR Investors May Face A ‘Hotel California’ Trap Amid Billions In Unrealized Losses, Analyst Warns

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