The artificial intelligence boom that powered Wall Street’s technology stocks is “now in the early stages of a bubble,” hedge fund manager Ray Dalio warned in a post on social media platform X on Monday.
Wall Street’s main indexes posted double-digit gains in 2025, marking a third straight year of advances, a run last seen during 2019–2021. The gains were fueled by heavy investor demand for AI-linked stocks, which pushed U.S. equity benchmarks to record highs.
Dalio, who co-founded hedge fund Bridgewater Associates in 1975, said U.S. stocks significantly underperformed non-U.S. equities and gold in 2025. Gold surged more than 60 per cent last year, while emerging markets posted a banner year and Britain’s blue-chip FTSE 100 outperformed major global markets.
“Clearly, investors would have much rather been in non-U.S. stocks than in U.S. stocks, just as they would have preferred to be in non-U.S. bonds than in U.S. bonds and U.S. cash,” he wrote in the post.
Global stocks seesawed in the fall as mounting concern over a potential AI stock bubble dragged on sentiment and raised the risk of a selloff.
Meanwhile, geopolitical tensions in the Middle East and uncertainty over the U.S. Federal Reserve’s interest rate path added to investor unease.
“Of course, there are big questions about Fed policy and productivity growth ahead,” Dalio said.
“It appears most likely that the newly appointed Fed chair and the FOMC (Federal Open Market Committee) will be biased to push nominal and real interest rates down, which would be supportive to prices and inflate bubbles.”
Analysts say global investors will actively seek opportunities this year in undervalued pockets of financial markets as growing concerns over an AI bubble push traders to look beyond highly valued technology stocks.
Bridgewater Associates’ main macro funds delivered a record-breaking performance in 2025, Reuters reported in late December.