Dalio: The global economy is "on shaky ground" for the next two years; don't rush to exit just because AI valuations are too high
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Dalio: The global economy is "on shaky ground" for the next two years; don't rush to exit just because AI valuations are too high
Although signs of a bubble have emerged in the AI industry, he believes attention should be paid to catalysts for its burst—monetary tightening or forced asset sales to meet debt obligations.
Navigating Web3 tides with focused insightsAuthor: Bao Yilong
Source: Wall Street Insights
Ray Dalio, founder of Bridgewater Associates, warned that the global economy will face a dangerous situation in the next one to two years, but he advised investors not to rush out of artificial intelligence investments solely due to high valuations, and instead focus on concrete signals of bubble bursts.
In an interview with CNBC on Monday, Dalio said that due to the confluence of three cycles—debt, political conflict, and geopolitics—cracks have already emerged in multiple market areas, including private equity, venture capital, and debt sectors undergoing refinancing.
Dalio pointed out that the global debt burden has begun exerting pressure in certain market segments, with governments unable to raise taxes or cut welfare, resulting in fiscal distress. This structural contradiction is intensifying domestic political polarization, and the rise of left-wing and right-wing populism signifies irreconcilable divisions.
With the 2026 U.S. midterm elections approaching, Dalio expects political conflicts to further escalate. High interest rates and concentrated market leadership are exacerbating this vulnerability.
Investment Strategy Amid Bubbles
Dalio believes the current bubble resembles the 2000 tech bubble, though not as severe as the 1929 bubble.
While acknowledging that the AI industry has entered a bubble phase, Dalio emphasized that investors should not hastily exit just because valuations have risen. He noted that historically all bubbles occurred during periods of technological transformation, and the key is identifying the signals of a bubble burst.
He stated that bubble bursts are typically triggered by monetary tightening or forced asset sales to meet debt obligations.
Several market participants have recently issued warnings about the AI bubble, including OpenAI CEO Sam Altman, who also hinted at signs of a bubble. Michael Burry, the investor who accurately predicted the 2008 subprime crisis, expects the artificial intelligence market bubble to collapse within the next two years.
Dalio specifically cautioned about mounting pressures in venture capital, private equity, and commercial real estate, where low-cost debt faces challenges in being refinanced at higher interest rates.
The Middle East Rising as the "Silicon Valley for Capitalists"
While warning of risks, Dalio compared the rise of certain Middle Eastern countries to Silicon Valley, saying the region is rapidly becoming one of the most influential AI centers globally.
He said that the UAE and its neighboring countries are combining vast pools of capital with inflows of global talent, attracting investment managers and AI innovators. Dalio stated:
There's a vibrancy here, much like San Francisco—the atmosphere around AI and technology feels very similar.
He described the UAE as a "haven in a turbulent world," praising its leadership, stability, quality of life, and ambition to build a globally competitive financial ecosystem.
The UAE and Saudi Arabia have launched multi-billion-dollar projects this year to develop cloud computing, data centers, and other AI infrastructure, backed by sovereign wealth funds and global tech partners.
A $10 billion agreement announced this year between Google Cloud and Saudi Arabia's Public Investment Fund aims to establish the country as a "global AI hub." Earlier this year, OpenAI, Oracle, Nvidia, and Cisco teamed up to build a large-scale "Stargate" data center campus in the UAE.
Dalio believes the Gulf region’s transformation is the result of deliberate national strategy and long-term planning. He noted:
What they're doing is cultivating talent. This region is becoming the Silicon Valley for capitalists. Now capital is flowing in, talent is flowing in.
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