Billionaire investor Ray Dalio has warned that the rapid rise in artificial intelligence-related investments resembles a “classic bubble” that could be approaching a turning point. Speaking at the Forbes Global CEO Conference in Singapore on Wednesday, the Bridgewater Associates founder pointed to rising interest rates, increasing debt and the challenge of converting paper wealth into cash as potential factors that could put pressure on the AI-driven market rally.

Dalio said a substantial amount of borrowing is being used to finance investments in artificial intelligence. He argued that higher interest rates could eventually make such financing more expensive and increase pressure on companies and investors that have committed heavily to AI infrastructure. In his assessment, the market is approaching the stage of the cycle when those financial pressures could begin to expose weaknesses in the rally.

His warning comes as major technology companies continue to commit hundreds of billions of dollars to artificial intelligence development and infrastructure. Some of that spending is increasingly supported by debt, while market gains have become concentrated among a relatively small group of technology stocks. At the same time, higher global bond yields have increased borrowing costs for companies seeking to fund large-scale investments.

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Despite those concerns, equity markets have continued to rise on expectations of strong technology earnings and sustained growth from artificial intelligence. The S&P 500 and Nasdaq 100 recently reached record levels, reflecting continued investor confidence in the sector. Dalio, who has previously raised concerns about excessive valuations surrounding AI, cautioned that strong market performance does not eliminate the risks created by elevated financing needs.

The investor also identified other factors that could put pressure on asset prices, including wealth taxes and policies that encourage investors to convert unrealised gains into cash. He argued that large fortunes held in stocks and other assets do not necessarily translate into readily available spending power. If investors are required to sell assets to meet financial obligations, that selling pressure could contribute to a downturn, he suggested.

Dalio’s latest comments add to a growing debate over whether the enormous capital flowing into artificial intelligence is supported by sustainable earnings and cash flows. While investors continue to place significant expectations on AI-related growth, higher financing costs and concentrated valuations remain areas of concern. Dalio said the market was not yet at the point of a major reversal but indicated that he believed it was getting closer to that stage.

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