Ray Dalio, founder of Bridgewater Associates, warned in a Bloomberg interview that the AI investment bubble will burst not because of technology failure but due to a liquidity crunch when investors need to convert paper wealth into cash. He distinguishes wealth (e.g., a startup's billion-dollar valuation after raising only $50 million) from money (actual spendable cash), arguing that when wealth grows faster than money supply, the system becomes fragile. Dalio notes that AI firms can create trillions in valuations without backing cash, with Bridgewater estimating Alphabet, Amazon, Meta, and Microsoft may invest $650 billion in AI infrastructure in 2026, up from $410 billion in 2025. The bubble pops when holders are forced to sell due to debt payments, wealth taxes, or fund redemptions. Dalio ties this to US fiscal imbalance ($7 trillion spending vs. $5 trillion revenue) and bond market stress, with bubble indicators near levels from 2000 and 1929. He highlights a vulnerable window after midterm elections and before the presidential vote. Dalio advises against panic selling but warns of lower future returns, and notes that a halt in chip exports from Taiwan could crash AI stocks. He favors Bitcoin (BTC) over cash.

Key facts

• Dalio says AI bubble will burst due to liquidity needs, not technology failure.
• Wealth (valuations) grows faster than money supply, creating fragility.
• Big tech may spend $650B on AI infrastructure in 2026, up from $410B in 2025.
• US fiscal deficit and bond market stress are key triggers.
• Dalio favors Bitcoin over cash as a hedge.

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