The artificial intelligence boom is no longer just a growth story, as one of Wall Street’s most prolific investors is sounding the alarm about how the tune could shift in 2026.
U.S. stocks surged last year, with the S&P 500 rising 16%, the third consecutive year of significant gains. Soaring technology stocks fueled much of that rise, powered by ongoing optimism about the future of AI. But this year, investors should brace for the possibility outperforming shares will collide with reality, billionaire hedge fund manager Ray Dalio warned on Monday.
“Obviously the AI boom that is now in the early stages of a bubble had a big effect on everything,” Dalio, founder of Bridgewater Associates, wrote in a 2025 retrospective on X.
While markets eventually posted a strong year, 2025 was not consistently a smooth ride for investors. In addition to market dips generated by the Trump administration’s tariff rollout, stocks were particularly sensitive to any warning signs from the AI camp. In August, the tech-heavy Nasdaq index fell 1.4% in a single morning after OpenAI CEO Sam Altman himself admitted an AI bubble was a possibility, and that investors as a whole might be “overexcited about AI.”
Much of the concern about an AI bubble has been focused on the technology’s rate of adoption, with one MIT study last year finding 95% of generative AI pilots at companies had so far failed to turn a profit. In a November interview with CNBC, Dalio did not deny the potentially transformative effects of AI, but maintained the currently soaring valuations of tech darlings could face a correction before companies figure out how to fully integrate AI.
