Dalio warns: The AI bubble won't burst for now, it's too early to exit

ChainCatcher News, billionaire investor and Bridgewater Associates founder Ray Dalio believes that even if you worry the market frenzy is a bubble waiting to burst, you shouldn't give up on the artificial intelligence (AI) sector too early. In an interview with CNBC on Thursday, he said he is convinced the current stock market is deeply entrenched in a bubble—but that is still not a reason for investors to exit AI trades.

Dalio explained to the media that the reason investors should stay in the market is simple: the conditions for a bubble to burst simply do not exist at present. "Don't sell just because it's a bubble," said the legendary fund manager. "You have to time it right. What will prick the bubble? Usually, it's a tightening of monetary policy, and we're not facing that situation right now."

In Dalio's view, a bubble only truly bursts when there is a need for asset liquidation in the market. He speculated that events such as a Federal Reserve rate hike or consumers facing a wealth tax could trigger a sell-off. In the foreseeable future, both scenarios seem unlikely to occur in the market.

"I want to reiterate, the stock market could rise significantly before the bubble bursts," Dalio added.