Key points
- Ray Dalio says the AI boom is close to its breaking point
- He points to debt, rising rates, and people cashing out
- Our index tracks insider selling, but not borrowing conditions
Ray Dalio says the AI bubble is nearing its breaking point, with rising borrowing costs and investors cashing out among the potential triggers. "I think we're close to that," the Bridgewater Associates founder said at the Forbes Global CEO Conference in Singapore on October 7, Bloomberg reported.
Dalio pointed to the debt financing the AI buildout and warned that rising rates could put it under pressure. He also described what happens when people need to turn paper wealth into money they can spend, including to pay wealth taxes. "Everybody says 'I'm worth a billion dollars' but OK, try to spend that," he said. "In order to spend that you have to sell wealth in order to get money — and so the bubble usually pricks at that."
That cash-out concern made me look at the insider selling in our AI Bubble Index. The index stood at 61 out of 100, in our Heated band, at 12:35 p.m. ET on October 7. Daily readings have stayed between 60 and 62 since September 24.
The index combines seven measures, including valuations and insider selling. It tracks market conditions, not when a bubble will burst, and it doesn't yet measure borrowing conditions.
Insider sales approach twice the baseline, mostly from Nvidia
Across our basket of 25 AI infrastructure companies, insiders recorded $999 million in discretionary stock sales over the past 90 days. That's 1.85 times our $539 million baseline, calculated from four earlier windows, giving the component a score of 66.
But Nvidia (NVDA) accounts for 95% of that total. Only nine companies recorded any discretionary sales. The dollar measure can also rise with share prices even if insiders sell no more shares.
So the reading mostly captures Nvidia insiders selling after a large run-up in the stock. It shows cashing out, but doesn't establish the broader selling pressure Dalio warned about. The individual trades are available on our insider tracker.
The index tracks financing exposure, but not borrowing conditions
The index tracks vendor-financing exposure, one part of Dalio's debt concern. It doesn't yet measure borrowing costs or access to credit. That's what we plan to add next.
We've been writing for months about how Nvidia and its biggest customers fund each other: Nvidia backs buyers like OpenAI, which then spend heavily on Nvidia chips.
Nvidia's guarantee is capped at $105 billion, equal to about 35% of its $303.0 billion in revenue for the 12 months ended July 26, 2026. That comparison shows the size of the exposure, not how much Nvidia has paid out. Lucent's customer-financing commitments and loan guarantees totaled $8.1 billion at the end of its 2000 fiscal year, equal to 24% of that year's $33.8 billion in revenue.
But the arrangements differ. Lucent often lent to carriers that banks had refused to finance. Nvidia's guarantee covers leases at an OpenAI data center site in Ohio, and its $105 billion cap is 58% below the $250 billion first discussed. The Wall Street Journal tied that reduction to investor concern.
The borrowing continues elsewhere in the industry. SpaceX (SPCX) is looking to raise $40 billion in debt to buy Nvidia chips, in a financing package that would be led by Apollo Global Management (APO), the Financial Times reported this week. Apollo is one of the firms Nvidia partnered with in August on financing platforms meant to raise more than $500 billion for AI infrastructure.
Rising borrowing costs also featured in the dot-com cycle. The Federal Reserve raised its benchmark rate from 4.75% to 6.5% between June 1999 and May 2000. We compared the two periods in a column last month. Bloomberg noted on October 7 that bond yields around the world have surged to the highest in decades, which raises the cost of funding the buildout.
Valuations send a cooler signal
Valuation is the reading that looks least like a bubble. The median forward price-to-earnings ratio across a 10-stock AI basket is 21.2, which scores 39, the lowest of the seven components.
Contract coverage is the hottest reading, at 73. Disclosed contract obligations across 19 companies cover about 20% of their combined market value. That isn't a valuation measure or a guarantee of future revenue, and disclosure varies widely by business model.
The two signals I'm watching are whether insider selling spreads beyond Nvidia and what happens to borrowing costs for the companies building data centers. Meanwhile, the S&P 500 and Nasdaq 100 both set record highs this week.
