According to Business Insider, billionaire investor Ray Dalio told CNBC on Thursday that AI stocks are definitely in a bubble but investors shouldn’t sell yet. The Bridgewater Associates founder said bubbles typically burst from monetary policy tightening, which isn’t happening now. Markets are pricing in a 96% chance rates will be lower by June 2025 despite strong job data. Nvidia recently reported $57 billion in Q3 revenue, up 62% year-over-year, and projected $65 billion next quarter, beating estimates. Dalio defined a bubble as wealth creation from new developments where questions arise about who actually owns that wealth.
The Bubble That Hasn’t Popped
Here’s the thing about Dalio’s argument—it’s simultaneously reassuring and terrifying. He’s basically saying “Yes, this looks exactly like every other bubble in history, but the pin that usually pops it isn’t coming.” That pin being Fed rate hikes. But isn’t that like saying a building is on fire but the firefighters aren’t coming yet so you should stay inside? The whole point of bubble recognition is to get out before everyone else realizes the music stopped.
The Circular Logic of AI Spending
What really worries me is Dalio’s mention of “circular” deals in the AI sector. We’re seeing companies buying each other’s AI services, investing in each other’s rounds, and creating this self-reinforcing ecosystem that looks productive but might just be wealth changing hands. When you’ve got Nvidia selling chips to companies that are building AI tools for… other companies buying Nvidia chips, you have to wonder where the actual economic value is being created versus just redistributed.
The Dangerous Rate Cut Assumption
Markets are pricing in near-certain rate cuts by mid-2025, but what if that’s wrong? The Fed has been clear they’re data-dependent, and if inflation proves stickier than expected, we could see rates stay higher for longer. Dalio’s entire thesis rests on monetary policy remaining accommodative. If that assumption cracks, his “don’t sell” advice could age terribly. Remember 2022? The Fed can change direction faster than investors can reposition.
Nvidia’s Make-or-Break Position
Nvidia’s staggering numbers—$57 billion last quarter, projecting $65 billion next—show just how concentrated this AI boom is. They’re the pickaxe sellers during the gold rush. But here’s my concern: when every bubble eventually deflates, it’s the infrastructure providers who get hit hardest on the way down. They’ve built massive capacity assuming endless demand growth. If AI adoption slows or the “circular” spending unwinds, Nvidia could face the mother of all inventory corrections. Their incredible success might be the very thing that makes them most vulnerable.
