Dalio: The global economy is "in danger" in the next two years, don't rush to exit just because AI valuation is too high

Author: Bao Yilong  

Source: Wall Street CN  

Ray Dalio, founder of Bridgewater Associates, has warned that the global economy will face a perilous situation in the next one to two years. However, he advised investors not to hastily withdraw from AI investments solely due to elevated valuations, but instead to focus on substantive signals of a bubble burst.  

In an interview with CNBC on Monday, Dalio stated that amid the confluence of three major cycles—debt, political conflicts, and geopolitics—cracks have emerged in multiple market segments, including private equity, venture capital, and the debt refinancing space.  

Dalio pointed out that the global debt burden has begun to exert localized pressure on markets. Governments worldwide are trapped in a fiscal dilemma, unable to either raise taxes or cut welfare spending. This structural contradiction is exacerbating domestic political polarization, with the rise of left-wing and right-wing populism signaling irreconcilable divisions.  

As the 2026 U.S. midterm elections approach, Dalio expects political conflicts to intensify further. The high-interest-rate environment and the concentration of market leadership have further amplified this vulnerability.  

## Investment Strategy Amid the Bubble  

Dalio draws parallels between the current bubble and the 2000 tech bubble, though he notes it is less severe than the 1929 crisis.  

While acknowledging that the AI sector has entered a bubble territory, Dalio emphasized that investors should not rush to exit merely because valuations have surged. He stated that all historical bubbles occur amid periods of technological upheaval, and the key lies in identifying signals of an impending burst.  

He highlighted that bubble catalysts typically stem from monetary tightening or forced asset sales to meet debt obligations.  

Recent weeks have seen numerous market figures sound the alarm on the AI bubble, including OpenAI CEO Sam Altman, who hinted at signs of froth in the market. Investor Michael Burry—who accurately predicted the 2008 subprime mortgage crisis—has warned that the AI market bubble could collapse within the next two years.  

Dalio specifically urged attention to pressures in venture capital, private equity, and commercial real estate, where low-cost debt is facing refinancing challenges at much higher interest rates.  

## The Middle East Emerges as the "Silicon Valley for Capitalists"  

Alongside his risk warnings, Dalio compared the rise of several Middle Eastern nations to Silicon Valley, noting the region is rapidly evolving into one of the world’s most influential AI hubs.  

He stated that the UAE and its neighboring countries are combining substantial capital pools with global talent inflows to attract investment managers and AI innovators. Dalio commented:  

"There’s an energy here, similar to San Francisco—an atmosphere centered around AI and technology that feels remarkably familiar."  

He described the UAE as "a haven in a turbulent world," praising its leadership, stability, quality of life, and ambition to build a globally competitive financial ecosystem.  

The UAE and Saudi Arabia have launched tens of billions of dollars in projects this year to develop cloud computing, data centers, and other AI infrastructure, backed by sovereign wealth funds and global tech partners.  

Google Cloud and Saudi Arabia’s Public Investment Fund announced a $10 billion agreement earlier this year to establish a "global AI hub" in the country. In the first half of 2024, OpenAI, Oracle, NVIDIA, and Cisco joined forces to build a large-scale "Stargate" data center campus in the UAE.  

Dalio attributes the Gulf region’s transformation to deliberate national strategy and long-term planning. He emphasized:  

"What they’re doing is nurturing talent. This region is becoming the Silicon Valley for capitalists. Right now, capital is pouring in, and talent is pouring in."  

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