Billionaire investor Ray Dalio said Wednesday that surging AI borrowing, rising interest rates and the pressure to convert paper wealth into cash are pushing markets closer to the point where the AI bubble could burst.

Debt and Rising Rates are the Pressure Point

Speaking at the Forbes Global CEO Conference in Singapore, the founder of Bridgewater Associates called AI a “classic bubble,” according to a report by Bloomberg.

He added that the huge amount of debt being taken out to fund AI, along with rising rates, is the point at which a bubble begins to pop.

“We’re in the part of the cycle that is before that but approaching that,” Dalio said, adding that “I think we’re close to that.”

In a Bloomberg Television interview, aired Tuesday, the investor compared the current boom to the late 1920s, saying such bubbles “always come together” with major innovation.

AI Spending Keeps Climbing

The AI spending behind it is still accelerating.

JPMorgan Chase CEO Jamie Dimon has estimated that spending across the hyperscaler ecosystem could rise from roughly $700 billion this year to $1 trillion next year, while Goldman Sachs expects the five biggest hyperscalers to issue about $250 billion in bonds this year and $400 billion in 2027.

Amazon.com Inc. (NASDAQ:AMZN), Microsoft Corp. (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL), Meta Platforms Inc. (NASDAQ:META) and Oracle Corp. (NYSE:ORCL) issued roughly $200 billion of investment-grade debt during the first half of 2026, almost twice their issuance during all of 2025, according to iShares.

This comes as the S&P 500 and the Nasdaq composite hit fresh highs on Tuesday.

The market is now concentrated with Nvidia Corp. (NASDAQ:NVDA), Apple Inc. (NASDAQ:AAPL), and Microsoft accounting for more than 21% of the S&P 500, according to Creative Planning data cited by Yahoo Finance.

Cashing Out on Paper Wealth

Dalio, who has been warning of an AI bubble, also said wealth taxes and other efforts to cash out unrealized gains could help trigger the fall.

“Everybody says ‘I’m worth a billion dollars, ‘ but OK, try to spend that," the investor said, adding that “in order to spend that, you have to sell wealth in order to get money — and so the bubble usually pricks at that.”

The ‘Big Short’ investor Michael Burry on Tuesday warned that the market is “quite obviously in its first stage of grief, denial,” adding that “per 2000 and 2008, this stage lasts 6-9 months.”

Price Action: Shares of Nvidia closed 0.14% higher on Tuesday at $239.24 and climbed 0.28% to $239.9, according to Benzinga Pro.

Benzinga Edge rankings indicate Nvidia’s stock has a Momentum score in the 88th percentile and a Growth score in the 98th percentile.

See More: Top Momentum Stocks

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