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.
In that interview, Dalio claimed he viewed the AI bubble as being at “about 80%” of the euphoria leading up to the 1929 stock market crash or the 2000 dot-com bubble.
Another factor Dalio emphasized was a weakened dollar in 2025. In one of its worst performances in years, the U.S. dollar declined 10% on the back of interest-rate cuts and uncertainty over trade policy. Dalio wrote an underperforming dollar could obscure some underlying weaknesses in markets.
“When one’s own currency goes down, it makes it look like the things measured in it went up. In other words, looking at the investment returns through the lens of a weak currency makes them look stronger than they really are,” he wrote.
Dalio pointed to various overseas stock markets that outperformed the U.S. through this lens, including Europe, China, the U.K. and Japan. Emerging markets posted the strongest returns last year, with the MSCI benchmark index rising 33%, double the S&P 500’s return. This is part of a larger trend of a shifting outlook in global capital, Dalio continued, which is no longer gravitationally bound to the U.S.
“There were big shifts in flows, values, and, in turn, wealth away from the U.S., and what is happening will probably lead to more rebalancing and diversifying,” he wrote.
