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Polkadot News Update: Dalio: Federal Reserve's Support Sustains AI Market Surge, Withdrawal Remains Too Soon

Polkadot News Update: Dalio: Federal Reserve's Support Sustains AI Market Surge, Withdrawal Remains Too Soon

Bitget-RWA2025/11/21 04:36
By:Bitget-RWA

- Ray Dalio warns AI-driven stock market nears bubble territory but advises against premature exits, citing Fed's accommodative policy as a key deflationary delay. - His proprietary bubble indicator at 80% capacity highlights AI speculation risks, yet rate cuts until 2025 could prolong the rally before any correction. - Nvidia's $57B Q3 revenue and S&P 500 record highs underscore AI's market dominance, while energy/software sectors show AI's expanding systemic impact. - Dalio urges investors to monitor Fed

Ray Dalio, the billionaire who established Bridgewater Associates, has cautioned that the current AI-fueled stock rally is approaching bubble levels, though he warned investors not to exit the market too soon. Speaking with CNBC, Dalio pointed out that while the market shows speculative excitement reminiscent of the dot-com bubble, the lack of major deflationary factors—such as interest rate hikes from the Federal Reserve—suggests the bubble may not burst in the near term

. "Don't sell just because you think it's a bubble," he advised, explaining that a more relaxed monetary environment could keep the rally going.

Polkadot News Update: Dalio: Federal Reserve's Support Sustains AI Market Surge, Withdrawal Remains Too Soon image 0
Dalio bases his view on his own bubble gauge, which he said is — similar to the market tops seen before the 1929 crash and the dot-com collapse in 2000. He credits the current surge to AI's disruptive promise and speculative buying, with tech stocks reaching unsustainable valuations. Still, he noted that the Fed's supportive policies, including anticipated rate reductions in 2025, could drive a final upswing before any downturn. "The bubble won't burst until the Fed tightens," Dalio remarked, suggesting investors should remain in the market for now .

The explosive growth of the AI sector highlights Dalio's concerns. Firms such as

, a key player in the AI space, have seen their valuations skyrocket on hopes for AI-driven expansion. in revenue for the third quarter, marking a 62% increase from the previous year and boosting investor optimism. At the same time, the S&P 500 has hit new highs, lifted by enthusiasm for AI and the Fed's accommodative stance. Dalio's cautions are echoed by broader market commentary, with outlets like Business Insider and WebProNews drawing comparisons between today's AI excitement and the dot-com era .

The Federal Reserve's position as a "lifeline" for the bubble is pivotal.

— expected to persist into 2025 — will keep liquidity flowing, allowing asset prices to climb higher before market fundamentals catch up. This pattern mirrors previous cycles where loose monetary policy prolonged rallies before sharp corrections. Investors are now divided between hedging and doubling down on AI-related bets, with Dalio's guidance resonating in a market where timing an exit is challenging.

Beyond equities, the AI surge is transforming industries such as energy and enterprise software. For example,

with Microsoft's cloud services demonstrates how AI is being woven into essential business functions. Meanwhile, from $56 billion in 2025 to $219.3 billion by 2034, propelled by AI-powered predictive analytics. These trends highlight AI's far-reaching influence, complicating Dalio's bubble argument with tangible industry shifts.

For those investing, Dalio's guidance is straightforward: keep a close eye on Fed actions and avoid making hasty exits. While the AI market's underlying factors are still developing—with both genuine innovation and speculative excess—the lack of immediate deflationary pressures means the bubble's path is still unpredictable.

, "A lot can go up before the bubble bursts," urging investors to proceed with caution in a market shaped by both history and hype .

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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