The artificial intelligence boom is no longer just a growth story, and one of Wall Street’s most prolific investors is sounding the alarm about a possible shift in tone in 2026.
U.S. stocks rose sharply last year, with the S&P 500 rising 16%, marking the third consecutive year of sharp gains. The rally has been driven in large part by a surge in technology stocks amid continued optimism about the future of artificial intelligence. But this year, billionaire hedge fund manager Ray Dalio warns that this year, investors should prepare for the possibility that the odds of outperforming stocks will collide with reality.
“Obviously, the AI craze that’s in the early stages of this bubble is having a big impact on everything,” said Dalio, the founder of Bridgewater Associates. wrote In review 2025 X.
While the market is finally having a strong year, 2025 won’t always be smooth sailing for investors. In addition to market declines as the Trump administration rolls out tariffs, stocks are particularly sensitive to any warning signs from the AI camp. August, technology-focused Nasdaq The index fell 1.4% in the morning following a personal announcement from OpenAI CEO Sam Altman admit An AI bubble is possible, and investors as a whole may be “over-excited about AI.”
Much of the concern about the AI bubble focuses on the adoption rate of the technology, A study from MIT Last year, the company found that 95% of generative AI pilot projects had failed to turn a profit so far. on a november interview and CNBCDalio didn’t deny the potentially transformative impact of artificial intelligence, but he insisted that the current surge in valuations for tech darlings may face a correction until companies figure out how to fully integrate it.
In that interview, Dalio claimed that he believed the AI bubble was “about 80 percent” as intense as the euphoria that led to the 1929 stock market crash or the 2000 dot-com bubble.
In an X post on Monday, Dalio pointed to ongoing questions about the Fed’s monetary policy stance as a big unknown in 2026. As Fed Chairman Jerome Powell’s term expires in May, President Donald Trump point out His choice for Powell’s successor will be “someone who believes that interest rates will be significantly lower.” Dalio wrote that a dovish central bank stance in 2026 is “most likely”, which could continue to support stock prices and further inflate the AI bubble.
In guidance for 2026, Dalio stressed that diversity is key, noting how gold could end 2025 as the “best performing major market.” The commodity, widely viewed as a safe-haven asset for investors, delivered outstanding returns last year ahead of a potential market correction. break record Along with other precious metals including silver and platinum. Dalio noted that gold outperformed the S&P by 47% last year, undermining some of the expected gains in U.S. stocks.
Another factor Dalio highlighted is a weaker dollar in 2025. The dollar fell 10%, one of its worst performances in years, amid uncertainty over rate cuts and trade policy. Dalio wrote that the dollar’s underperformance could mask some underlying weakness in the market.
“When a country’s currency depreciates, it looks like the things it is measured against have risen. In other words, viewing investment returns through the lens of a weak currency can make them appear stronger than they actually are,” he writes.
Dalio pointed out that from this perspective, multiple overseas stock markets have performed better than the United States, including Europe, China, the United Kingdom and Japan. Emerging markets posted the strongest returns last year, with the MSCI benchmark up 33%, double the S&P 500’s return. Dalio continued that this is part of a larger trend of a shift in the outlook for global capital, which is no longer bound by the gravity of the United States.
“The flow of money, values, and wealth out of the United States has changed dramatically, and what is happening is likely to lead to more rebalancing and diversification,” he wrote.