Billionaire investor Ray Dalio warned that heavy borrowing to finance AI could leave the sector vulnerable as interest rates rise.
Speaking at the Forbes Global CEO Conference in Singapore on October 7, the Bridgewater Associates founder described AI as a “classic bubble” approaching a potential breaking point.
“I think we’re close to that,” Dalio said, according to Bloomberg’s report. His remarks were a warning about financial conditions, without a specific date for a crash.
Why borrowing matters
Technology companies are committing enormous sums to chips, data centers and computing infrastructure, increasingly using debt to fund expansion.
Higher rates make new borrowing and refinancing more expensive. Projects also need stronger returns to justify their financing costs, creating pressure when spending arrives well before revenue.
Dalio also pointed to the risk of investors needing to convert paper wealth into cash. Selling assets to meet those needs can intensify pressure on prices.
Related: The AI Boom Is Increasingly Being Financed by Debt.
The test is whether revenue catches up
A technology can prove useful while some investments in it fail to earn adequate returns. For AI companies, the financial test involves customer revenue, operating costs and the timing of debt repayments.
Companies with strong cash generation have more flexibility than businesses dependent on repeated fundraising to complete projects.
Dalio’s warning puts the financing behind the AI boom in focus: ambitious growth plans become harder to sustain when borrowing costs rise faster than cash flow.
Disclosure: This article does not represent investment advice. The content is for informational and educational purposes only.
