Ray Dalio warns that AI stocks could drop 80% during a bubble despite transformative technology potential, citing his bubble gauge at 75% of 1929/2000 extremes.
Macro & Markets ·
In a July 17 interview with My First Million, Ray Dalio stated that even the most successful companies could see stock prices fall by about 80% during a bubble period. While he acknowledges that major new technologies generate investment excitement and opportunity, he argues that promising technological prospects do not ensure strong stock returns, citing high valuations and competitive pressures as countervailing forces.
Dalio's assessment rests on his "bubble gauge," which he reports is currently at 75% of the extreme levels observed in 1929 and 2000. He characterizes bubble bursts as typically occurring when investors face pressure to convert wealth into cash, a dynamic often triggered by monetary tightening or wealth taxes. The framing suggests that the technology sector's transformative potential does not shield AI-related equities from valuation risk.
What remains unclear is the specific timeframe Dalio envisions for such a correction, the sectors or individual companies he views as most vulnerable, or whether his gauge incorporates recent market movements. His comments reflect a structural concern about asset prices rather than a near-term prediction, leaving open how investors should calibrate exposure or timing based on his framework.