Ray Dalio, co-founder of Bridgewater, describes the current state of artificial intelligence as a typical bubble, stating it is nearing a breaking point. His assessment is not based on technology being overvalued, but rather on rising interest rates and holders needing to convert wealth into cash.

On October 7, Bloomberg reported that at the Forbes Global CEO Conference in Singapore, he mentioned that a significant amount of debt is being borrowed to finance AI; the continued rise in interest rates marks the point where the bubble begins to burst. On October 6, he told Bloomberg TV that large-scale cloud providers, which previously relied on equity financing, are now turning to the debt market and are starting to encounter credit thresholds.

He characterized the conditions for a burst as a demand for cash, not a change in perspective. Examples include loan repayments and wealth taxes. In the same interview, he compared the AI craze to the 1929 stock market crash and the 2000 internet bubble, pointing out two pathways: forced asset sales for cash and an influx of new stock supply that dilutes existing holders.

The timeline for the debt crisis varies in different contexts. In the Bloomberg TV interview, he stated that the debt crisis would occur within the next three years, by fall 2029; in a video interview at the Greenwich Economic Forum, he said the supply-demand imbalance would turn into a crisis sometime within the next two years. Both interviews took place on October 6. He noted that AI has become heavily reliant on debt, which could tighten riskier credit like auto loans, with lower-income individuals being squeezed the hardest during this period.

On the buyer side, he is also withdrawing. About one-third of U.S. Treasury bonds are held by foreign investors, with Japan and China holding the majority; he stated that China does not want to continue increasing its holdings for both geopolitical and economic reasons, while Japan, which has lent a lot to the U.S., now wants to reclaim some of it. Some Chinese holdings may be held through other countries, with Belgium's latest report showing U.S. Treasury holdings at $470.7 billion.

His positions include shorting debt and going long on gold. In an ideal portfolio, gold would account for 5% to 15%; Bitcoin would be about 1%, which he does not support, citing that AI models can already breach digital vaults. His family office has moved to Abu Dhabi, and he is also looking at the UAE and Singapore. This is an event-driven allocation, not a new fundraise.

If funds follow his script, they will flow from AI debt and U.S. Treasury demand into gold and cash. Beneficiaries will be cloud providers that can issue debt before interest rates rise and gold holders, while those under pressure will be AI spenders relying on rolling loans to maintain capital expenditures and U.S. Treasuries dependent on continued purchases from China and Japan. For him, the bubble bursting equates to a repayment date, not a sudden failure of models.

Source: Public Information