Bridgewater Associates founder Ray Dalio says the current hype over “superscalers” is distracting investors, and they run the risk of repeating the dot-com bubble.
“There are new technologies that are remarkable and reshaping the world, and then people get excited about those, and they don’t pay attention to prices,” says the billionaire investor on a panel in Singapore on March 12. “This looks very much like 1998, 1999 to me.”
Speaking at CNBC’s inaugural Converge Live summit at Jewel Changi Airport, Dalio adds: “It’s better to buy stock in a bad company at a cheap price than it is to buy stock in a great company at an expensive price.”
“Superscalers”, as Dalio calls them, are “not going to make all that money”. Also known as hyperscalers, these are large cloud service providers that can provide computing and storage services at scale.
Instead, how AI is used is more consequential, he adds. “For me, it’s like, how do I use AI to make better investment decisions?”
Dalio’s comments come amid a punishing week that has wiped almost US$4 trillion ($5.3 trillion) from the S&P 500’s peak in February.
Dalio, who has served as co-chief investment officer of the world’s largest hedge fund since 1985, notes that the price of equities is “high relative to bonds”. “You have this bubble developing in a precarious world economy that has the effects that you’re seeing. It doesn’t mean that technology is bad; it just means we have the other four forces that are bad, and we have high prices,” Dalio adds.
He was referring to the “five forces” he had earlier outlined: monetary order, internal political order within the US, geopolitical order, climate and acts of nature, and new technologies. “They inter-relate to each other to create big cycles that go from one order to another, and we are now in that transition to new orders of all of those forms.”
The world does not fully grasp how these cycles take place, says Dalio. “We don’t really have a good sense of the arc of history.”
See also: What’s at stake as Trump looks to scrap the Chips Act
Tariffs to cause ‘fighting’
Today’s volatility is not new; Dalio says the world is witnessing “an extension of the patterns of history.” Specifically, in the 1930s, Germany wrote down debts, imposed tariffs to collect revenue and ramped up nationalism and militarism.
“Be nationalistic, be protectionist, be militaristic — that’s the way these things operate,” he adds. “The issue is really the confrontation of all of this, the fighting of all of this.”
Tariffs are going to cause “fighting” among countries, says Dalio, but “not necessarily” military conflict. “Think about the US, Canada, Mexico, China and all of those types of fighting. There will be fighting, and that will have consequences, and I think that’s the main thing to pay attention to.”
Looking back at history once again, Dalio says “neutral countries do extremely well” in such times. “They get people and capital that go to them. They are able to navigate, in a certain way, the making of great prosperity.”
There are also beneficiaries from periods of upheaval, says Dalio. “Singapore, if it remains a neutral country — and it’s a very difficult thing to do — and it operates this way, it becomes a great opportunity.”
The impact of conflict on different corners of the world will vary, and Dalio is concerned about this eventual “situation”. “But there’s also these other worlds that you know get through it and are not involved.”
