Ray Dalio, the billionaire founder of Bridgewater Associates, warned that a bubble might be forming around large U.S. tech companies due to the AI boom. More specifically, he told CNBC that “there’s a lot of bubble stuff going on,” but added that bubbles usually don’t burst until monetary policy tightens. Right now, he expects the Federal Reserve to keep rates easy and possibly cut them further, which could allow the bubble to keep growing for a while.
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Interestingly, Dalio said that his own “bubble indicator” is currently high, and he’s not alone. Indeed, many other market experts have also raised concerns about the AI-driven hype. And while AI-related Big Tech stocks are soaring, Dalio pointed out that the rest of the market hasn’t done very well. In fact, 80% of gains are concentrated in Big Tech names.
He also said that the economy is now split into two parts: some areas are weakening and driving the Fed to cut rates, while others, like AI tech, are overheating. Because of this divide, he believes monetary policy can’t help both at once, thereby making it more likely that the bubble will grow even further. Unsurprisingly, Dalio compared the current moment to past speculative periods, such as 1998–1999 or 1927–1928. And even if we can’t say exactly when the bubble will burst, he warned, “there’s a lot of risk.”
Is SPY Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on the SPDR S&P 500 ETF Trust (SPY) based on 414 Buys, 84 Holds, and six Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average SPY price target of $749.51 per share implies 9.1% upside potential.
