The euphoria about artificial intelligence has raised the share prices of many companies in the past few months. But hedge fund legend Ray Dalio sees parallels to the Dotcom bubble and warned of an overvaluation. The Deepseek shock already provided initial indications of this at the end of January.
• Ray Dalio warns of current parallels in the phase between 1998 and 1999
• AI bladder could burst like Dotcom bubble
• Dalio: AI as a groundbreaking technology – but not synonymous with successful investment
Ray Dalio, founder of the hedge fund Bridgewater Associates, warned of the “Financial Times” about a speculation bubble on the US market. According to his statements, AI optimism led to blistering in US shares such as Nvidia, which reminds him of the time before the dotcom bubble bursting. “The current phase of the cycle is very similar to the phase between 1998 and 1999,” said Dalio. At that time, great hopes for the Internet had led to a massive increase in stock prices before the ratings crashed and numerous companies had to register bankruptcy, since only a few companies could actually make profits with the new technology at the time.
Currently seeing classic features of bladder formation
According to “finimize”, the classic scenario of bladder formation is also becoming apparent: a new groundbreaking technology arises – at that time the Internet, today AI – that has the potential to revolutionize entire industries. According to the website, investors would then buy the Best Case Scenario and the share prices would ultimately increase on reviews based on expectations that could hardly be met. The smallest warning signal is then enough to flee investors. The result: the bubble bursts.
That actually sounds very familiar at the moment and could suggest that another tech bubble has formed. Before the crash of the Dotcom era, the tech index Nasdaq 100 had doubled within a short time and the US index is currently about twice as high as at the beginning of 2023. US companies such as Alphabet, Microsoft or Meta have billions In AI and the shares of chip corporations such as Nvidia or Broadcom driven to airy heights. However, there is an increasing doubt whether the high investments and ratings are actually justified and will pay off in the future in corresponding profits. A first shock, which led to a temporary drastic assessment correction among the companies concerned, experienced the AI euphoria at the end of January through the Ki model Deepseek-R1 from the Chinese startup Deepseek, which is more cost-efficient than the big US competitors and also on less powerful Chips can run. This led to violent losses in US shares with AI. At Nvidia, 600 billion US dollars were destroyed in market capitalization within just one day.
Dalio: That could make the AI bubble burst
As Ray Dalio emphasized on the day of the Deepseek shock compared to the “Financial Times”, AI is a groundbreaking technology, but that does not automatically mean that every investment in this area will also be successful. “There is an important new technology that will certainly change the world and will be successful. But some people confuse this with the success of the investments,” said the experienced investor. As with the advent of the Internet, there should also be some companies in which the AI investments will not pay off financially and which may have to go into bankruptcy.
Dalio also sees another parallel between today and the time of the Dotcom bubble: the USMonetary policy. The combination of high ratings and interest risks, which also currently exist, is particularly dangerous and “could cause the bladder to burst”. The US Federal Reserve left the key interest rates at its most recent session at its previous level, but the projections of the US currency managers had signaled in December that the central bankers in 2025 expect fewer interest cuts than a few weeks earlier. On the US exchanges, this had led to significantly sacking courses a few days before Christmas. The Fed also had 2000, then under the direction of Alan Greenspantheir monetary policy tightens what the bursting of the dotcom bubble should have favors.
It remains to be seen whether the current AI hype actually leads to a crash. However, it is clear that the latest developments around Deepseek and Ray Dalio’s statements should make investors listen. The coming months should now show whether the AI market remains stable – or whether the story is repeated.
Editor finance.net
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