Author: Bao Yilong
Source: Wall Street News
Bridgewater founder Ray Dalio warned that the global economy will face a dangerous situation in the next one to two years, but he advised investors not to rush to exit artificial intelligence investments just because of high valuations, but to focus on substantive signals of a bubble burst.
In an interview with CNBC on Monday, Dalio said that due to the combined effects of three major cycles—debt, political conflict, and geopolitics—cracks have already appeared in multiple areas of the market, including private equity, venture capital, and debt that is being refinanced.
Dalio pointed out that the global debt burden has begun to exert pressure in parts of the market, and governments are unable to either raise taxes or cut benefits, leaving them in fiscal distress. This structural contradiction is exacerbating domestic political polarization, and the rise of left-wing and right-wing populism means irreconcilable differences.
As the 2026 U.S. midterm elections approach, Dalio expects political conflicts to intensify further. The high-interest-rate environment and the concentration of market leadership are further exacerbating this fragility.
Investment Strategy in a Bubble
Dalio believes the current bubble is similar to the 2000 tech bubble but not as severe as the 1929 one.
While acknowledging that the AI industry has entered bubble territory, Dalio emphasized that investors should not rush to exit just because of soaring valuations. He stated that historically, all bubbles have occurred during periods of dramatic technological change, and the key is to identify the signals of a bubble burst.
He pointed out that the catalyst for a bubble burst usually comes from monetary tightening or forced asset sales to meet debt obligations.
Recently, several market participants have issued warnings about the AI bubble, including OpenAI CEO Sam Altman, who also hinted at signs of a bubble. Investor Michael Burry, who accurately predicted the 2008 subprime mortgage crisis, expects the AI market bubble to collapse within the next two years.
Dalio specifically reminded attention to the pressures in venture capital, private equity, and commercial real estate, where low-cost debt is facing the dilemma of being refinanced at higher interest rates.
The Middle East Rises as the 'Silicon Valley for Capitalists'
While warning of risks, Dalio compared the rise of some Middle Eastern countries to Silicon Valley, saying that the region is rapidly becoming one of the world's most influential AI centers.
He stated that the UAE and its neighboring countries are combining large capital pools with an influx of global talent, attracting investment managers and AI innovators. Dalio said:
There is a kind of vitality here, just like in San Francisco, and the atmosphere around AI and technology is very similar.
He described the UAE as a "paradise 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 projects worth tens of billions of dollars this year to build cloud computing, data centers, and other AI infrastructure, supported by sovereign wealth capital and global technology partners.
A $10 billion agreement announced this year between Google Cloud and the Saudi Public Investment Fund aims to create a "global AI center" in the country. Earlier this year, OpenAI, Oracle, NVIDIA, and Cisco teamed up to build a large "Stargate" data center campus in the UAE.
Dalio believes that the transformation in the Gulf region is the result of deliberate national strategies and long-term planning. He pointed out:
What they are doing is cultivating talent. This region is becoming the Silicon Valley for capitalists. Now capital is flowing in, talent is flowing in.
