Dalio Sounds Alarm on AI Stocks: 80% Crash Imminent?
Billionaire investor Ray Dalio has warned that companies building the AI revolution could see their stocks fall by as much as 80% even if they succeed in changing the world. This warning comes at a time when crypto markets are running hot on AI narratives, with Dalio's bubble gauge sitting at 75% of the extremes seen in 1929 and 2000.
Dalio explained that during bubble periods, even the most successful companies can lose about 80% of their market value. He described how the excitement around major new technologies fuels investment, but promising prospects alone do not guarantee good stock returns. High starting valuations and a wave of new competitors typically erode the upside.
The usual catalysts for bubble deflation are tightening monetary policy or new wealth taxes, which could rapidly change the liquidity backdrop that has propped up AI valuations. Dalio's historical research suggests that bubbles deflate when investors are forced to convert paper gains into cash.