Ray Dalio says a risky AI market bubble is forming, but may not pop until the Fed tightens

Core Viewpoint - Ray Dalio warns of a potential bubble forming around megacap technology stocks in the U.S. due to the artificial intelligence boom, suggesting that it may persist until the Federal Reserve changes its current easy monetary policies [1][2]. Group 1: Bubble Concerns - Dalio indicates that there is significant "bubble stuff" occurring in the market, but bubbles typically do not burst until monetary policy tightens [2]. - He employs a personal "bubble indicator" that is currently at a relatively high level, aligning with concerns from other market participants regarding a potential AI-related bubble [2]. Group 2: Federal Reserve Actions - The Federal Reserve is anticipated to cut interest rates for the second time this year, with expectations for another cut in December [3]. Group 3: Market Performance - Outside of AI-related companies, the overall market has performed "relatively poorly," with a concentrated environment where 80% of gains are attributed to Big Tech [4]. - Major indexes reached all-time closing highs, primarily driven by technology stocks, with positive AI news expected from upcoming Big Tech earnings [4].