Ray Dalio warns of AI market bubble mirroring 1929 and 2000

Ray Dalio, founder of Bridgewater Associates, has warned that the current enthusiasm surrounding artificial intelligence (AI) shows signs of a market bubble. During an appearance on ‘The Diary of a CEO’ podcast, Dalio suggested that current stock valuations mirror the speculative excesses seen before the market crashes of 1929 and 2000.

Supporting this view is the cyclically adjusted price-to-earnings (CAPE) ratio, which currently sits near 41. This exceeds the 32.6 level recorded before the 1929 crash and approaches the all-time high of 44.2 seen during the dot-com era in 2000. Historically, such elevated readings have signaled muted future returns.

Dalio also contextualizes these developments within his ‘Big Cycle’ framework, which analyzes long-term economic and geopolitical shifts. He notes that the post-World War II order, established around 1945, is reaching the end of its typical 75-to-80-year cycle, characterized by US-centric leadership and the dominance of the dollar.