Ray Dalio says AI bubble ‘about to burst’ as debt, rising rates raise warning signs

October 9, 2026 5 Min Read

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Billionaire investor Ray Dalio said Wednesday that increased AI borrowing, rising interest rates and pressure to convert paper wealth into cash are pushing markets closer to the point where the AI bubble could burst.

Debt and rising rates are the pressure point

Speaking at the Forbes Global CEO Conference in Singapore, the founder of Bridgewater Associates called AI a “classic bubble,” according to a Bloomberg report.

He added that the huge amount of debt taken on to fund AI, along with rising interest rates, is the point at which a bubble begins to burst.

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“We’re in the part of the cycle that’s before that, but we’re getting close to it,” Dalio said, adding that “I think we’re close to it.”

In an interview with Bloomberg Television, broadcast Tuesday, the investor compared the current boom to the late 1920s, saying such bubbles “always come with” major innovations.

AI spending continues to climb

AI spending continues to accelerate.

JPMorgan Chase CEO Jamie Dimon estimated that spending in the hyperscaler ecosystem could increase from around $700 billion this year to $1 trillion next year, while Goldman Sachs expects the five largest hyperscalers to issue around $250 billion in bonds this year and $400 billion in 2027.

Amazon.com Inc.. , Microsoft Corp. , Alphabet Inc.., Meta Platforms Inc. And Oracle Corp.. issued about $200 billion of investment-grade debt in the first half of 2026, nearly double their issuance in all of 2025, according to iShares.

See also: Avoid Investing Mistake #1: How Your “Safe” Assets Could Cost You

This comes as the S&P 500 and Nasdaq Composite Index hit new highs on Tuesday.

The market is now concentrated with Nvidia Corp., Apple Inc.and Microsoft accounting for more than 21% of the S&P 500, according to Creative Planning data cited by Yahoo Finance.

Profit from paper wealth

Dalio, who warns of an AI bubble, also said wealth taxes and other efforts to cash in on unrealized gains could help trigger the slide.

“Everyone says, ‘I’m worth a billion dollars,’ but hey, try spending that,” the investor said, adding that “to spend that, you have to sell wealth in order to get money — and so the bubble usually punctures because of that.”

The “Big Short” Investor Michael Burry warned Tuesday that the market was “obviously in its first stage of mourning, of denial,” adding that “for 2000 and 2008, this stage lasts 6 to 9 months.”

Photo courtesy: Shutterstock

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