The Zhitong Finance App learned that Qiaoshui Foundation founder Ray Dalio warned that artificial intelligence is a “classic bubble”. Due to rising interest rates and the need to turn wealth into cash, the bubble is nearing the point of bursting.
On Wednesday, Dalio said at the Forbes Global CEO Conference in Singapore that people are borrowing huge amounts of debt to fund artificial intelligence. As interest rates continue to rise, the point where the bubble begins to burst has arrived.
The billionaire said, “We are in this cycle, before that point, but we are approaching it,” and “I think we are very close to that point.”
At the time of his remarks, tech giants are investing hundreds of billions of dollars in artificial intelligence and are increasingly relying on debt financing, and market gains are also being concentrated on a few stocks. Global bond yields have soared to their highest level in decades, raising the cost of financing the huge investments required to build artificial intelligence infrastructure.
Still, stock valuations continued to climb, and optimism about tech earnings drove the S&P 500 and Nasdaq 100 indices to record highs this week.
Dalio has been warning about the AI bubble for a long time. He said there are other factors that may trigger the bubble to burst, including wealth taxes and other measures to turn unrealized gains into cash.
“Everyone says 'I'm worth a billion dollars, 'but OK, try spending it,” he added. “If you want to spend it, you have to sell your wealth in exchange for money — and that's where the bubble usually bursts.”