Aditi Ganguly
12 min read
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For the last several months, Ray Dalio hasn’t been shy with sharing his concerns about a potential AI bubble and he doesn’t seem to be softening his stance (1).
During a recent appearance on Steven Bartlett’s The Diary of a CEO podcast, Dalio, the founder of investment management firm Bridgewater Associates, said he believes enthusiasm around AI has pushed markets into a bubble territory that looks a lot like the run-ups to the historic market crashes of 1929 and 2000 (2).
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This renewed warning comes after SpaceX went public on June 12 with the largest initial public offering in history (3), while both Open AI (4) and Anthropic (5) prepare to launch IPOs that are expected to push those companies into trillion-dollar valuations. As Fortune (6) notes, this is the type of “speculative issuance surge” that financial experts and market historians believe is the clearest warning sign of a bubble.
The podcast opened with a discussion of Jeremy Grantham, the founder of Grantham, Mayo, Van Otterloo & Company (GMO), who previously told the show that we’re looking at “the biggest investment bubble in American history,” Dalio agreed.
“He’s right,” Dalio said.
The “Four Horsemen of the Bubble Apocalypse”
Owen Lamont, senior vice president and portfolio manager for Acadian Asset Management, created a financial bubble checklist that he’s called the “Four Horsemen of the Bubble Apocalypse” (7). This checklist notes the things that will likely happen when a bubble is about to pop:
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Overvaluation: Current prices are at very high levels, according to expert opinions and historical norms.
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Bubble beliefs: A large number of market experts say prices are too high and will likely rise even higher.
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Equity issuance: A high level of equity issuance from new firms (IPOs) and existing firms over the last year, accompanied by lower levels of repurchases.
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Inflows: An unusually high number of new investors entering the stock market.
