The artificial intelligence-driven rally that lifted Wall Street’s technology stocks is now entering the early phase of a bubble, according to hedge fund veteran Ray Dalio.
In a post shared Monday on X, Dalio warned that rapid gains in AI-related stocks are showing familiar bubble-like characteristics after years of strong performance in U.S. equities.
Major Wall Street indexes recorded double-digit gains in 2025, extending a three-year rally last seen between 2019 and 2021. Much of that momentum came from intense investor demand for artificial intelligence stocks, which pushed U.S. equity benchmarks to record highs.
However, Dalio noted that U.S. markets lagged behind other asset classes over the past year. Non-U.S. equities and gold delivered stronger returns, with gold surging more than 60% in 2025. Emerging markets also posted robust gains, while the UK’s FTSE 100 outperformed several major global benchmarks.
Dalio wrote that investors would have been better positioned in overseas assets, including foreign stocks and bonds, rather than holding U.S. equities, bonds, or cash.
Market volatility picked up in the autumn as concerns about a potential AI stock bubble weighed on sentiment and increased fears of a broader correction. Those worries were compounded by ongoing geopolitical tensions in the Middle East and uncertainty surrounding the future direction of U.S. monetary policy.
Dalio said key questions remain around interest rates and productivity growth. He added that the newly appointed leadership at the Federal Reserve and the Federal Open Market Committee may be inclined to push both nominal and real interest rates lower. Such a stance, he argued, could support asset prices while further inflating speculative excesses.
Analysts say that as concerns around AI valuations grow, global investors are increasingly searching for opportunities in undervalued areas of financial markets rather than concentrating exposure in highly priced technology stocks.
Meanwhile, Bridgewater Associates’ flagship macro funds delivered their strongest performance on record in 2025, according to reports released in late December.
