Dalio warns: The global economy is "in danger" in the next two years, don't rush to exit because AI valuation is too high
Dalio, founder of Bridgewater Associates, warned that the global economy will face a dangerous situation in the next one to two years, affected by the combined effects of the three major cycles of debt, political conflict and geopolitics. He advises investors not to rush out of AI investments simply because valuations are too high, but to pay attention to substantive signs of a bubble bursting. This article originates from an article written by Wall Street Insights and is organized, compiled and written by ForesightNews.
(Preliminary summary: Dalio of Bridgewater Fund: I have Bitcoin, but it only accounts for 1% of the investment portfolio; BTC will never be a reserve currency of a sovereign country)
(Background supplement: Dalio of Bridgewater: The proportion of my Bitcoin holdings has not changed! Stable coins are "not cost-effective" to save wealth)
Dalio believes that although AI The industry is already showing signs of a bubble, but he believes it needs to focus on the catalysts for the bubble to burst - monetary tightening or forced sales of assets to meet debt obligations. Dalio warned that the global economy will face a dangerous situation in the next one to two years, but he suggested that investors should not rush out of artificial intelligence investments simply because valuations are too high, but should pay attention to substantive signs of a bubble bursting.
In an interview with CNBC on Monday, Dalio said that due to the superimposed influence of the three major cycles of debt, political conflict and geopolitics, the current market has experienced cracks in multiple areas, including private equity, venture capital, and the debt area that is being refinanced.
Dario pointed out that the global debt burden has begun to exert partial pressure on the market, and governments can neither increase taxes nor cut benefits, and are in financial difficulties. This structural contradiction is exacerbating domestic political polarization, with the rise of left-wing and right-wing populism implying irreconcilable differences.
As the 2026 U.S. midterm elections approach, Dalio expects political conflict to intensify further. The high interest rate environment and the concentration of market leadership further exacerbate this vulnerability.
Investment Strategies in Bubbles
Dalio believes that the current bubble is similar to the technology bubble of 2000, but not to the extent of 1929.
While acknowledging that the AI industry has entered bubble territory, Dalio stressed that investors should not rush out just because valuations have risen. He said that all bubbles in history have occurred during periods of technological upheaval, and the key is to identify the signs of a bubble bursting.
He pointed out that the catalyst for a bubble bursting usually comes from monetary tightening or forced sales of assets to meet debt obligations.
Many market participants have recently warned of an AI bubble, including OpenAI CEO Sam Altman, who also hinted that there are signs of a bubble in the market. Michael Burry, the investor who accurately predicted the 2008 subprime mortgage crisis, predicts that the artificial intelligence market bubble may collapse within the next two years.
Dario specifically called attention to the pressures in the venture capital, private equity and commercial real estate sectors, where low-cost debt is facing the dilemma of being rolled over at higher interest rates.
The Middle East has emerged as the "Silicon Valley of Capitalists"
While warning of risks, Dalio compared the rise of some Middle Eastern countries to Silicon Valley, saying that the region is quickly becoming one of the most influential AI centers in the world.
The UAE and its neighbors combine large capital pools with an influx of global talent and are attracting investment managers and AI innovators, he said. Dalio said:
There is an energy here that is very similar to that in San Francisco around AI and technology.
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 United Arab Emirates and Saudi Arabia have launched tens of billions of dollars in projects this year to build cloud computing, data centers and other AI infrastructure, backed by sovereign wealth capital and global technology partners.
The $10 billion agreement announced this year between Google Cloud and Saudi Arabia’s Public Investment Fund aims to create a “global AI hub” in the kingdom. Earlier this year, OpenAI, Oracle, Huida and Cisco teamed up to build a large-scale "Stargate" data center park in the United Arab Emirates.
Dalio believes that the transformation of the Gulf region is the result of thoughtful national strategies and long-term planning. He pointed out:
What they do is develop talents. This area is becoming Silicon Valley for capitalists. Now money is pouring in and talent is pouring in.
