Ray Dalio Warns Investors About AI Stocks, Pricing, and the Rise of DeepSeek AI
In a thought-provoking discussion on the All-In Podcast with David Friedberg, Ray Dalio, founder of Bridgewater Associates, shared key insights on investment strategies amid global economic shifts and the rapidly growing artificial intelligence (AI) sector. His comments come at a time when companies like DeepSeek are challenging traditional tech giants, such as Nvidia, in the race for AI dominance.
Dalio’s Warning: The Perils of Overpaying for ‘Good’ Companies
Dalio’s central point during the podcast focused on the importance of pricing in investment decisions, especially when navigating high-growth sectors like AI. He cautioned that investors often fall into the trap of buying “great” companies that are overvalued—a strategy that could lead to significant losses. “A great company that gets expensive is much worse than a bad company that’s really cheap,” he warned, urging investors to prioritize value and remain mindful of pricing dynamics.
Drawing parallels to the 1998-99 tech bubble, Dalio raised concerns about inflated asset prices in sectors fueled by productivity growth and disruptive technologies. With rising interest rates and a shifting economic environment, Dalio stressed the risks of excessive leverage in the market, noting that “everyone is leveraged long.” His advice? Diversification remains crucial for mitigating risks in uncertain times.
Dalio: Nvidia Faces Risk Amid AI’s Rapid Evolution
Dalio’s commentary also took aim at Nvidia, which has long been a leader in the AI chip market. He pointed out that while Nvidia is a “superscalar” in the space, the company’s market dominance could expose it to certain risk issues, particularly as competition heats up. Nvidia’s H800 chips, for example, are at the center of recent headlines following a Chinese startup DeepSeek surpassing ChatGPT on Apple’s App Store with its DeepSeek-V3 AI model.
Dalio, emphasizing the growing competitive landscape, noted that while China is a bit behind in chip manufacturing, it’s ahead in AI applications. His comments about DeepSeek’s lower-cost approach to training its AI models have raised eyebrows, with reports suggesting the company trained its DeepSeek-V3 model for under $6 million using Nvidia’s chips—far less than what it would cost to train American models. While some analysts have questioned the accuracy of these cost figures, the consensus is that DeepSeek is leveraging cost-efficiency to rival leading Western models.
China AI and Manufacturing Advantage
Dalio further highlighted China’s manufacturing dominance, noting that the country produces 33% of the world’s manufactured goods—more than the combined output of the U.S., Japan, and Germany. He predicted that Chinese-made products incorporating AI chips could flood global markets, potentially altering the competitive balance in AI technology and other sectors.
Stock Impact: Nvidia’s Market Turmoil Amid DeepSeek’s Success
As DeepSeek-V3 gained traction, Nvidia’s stock suffered a sharp 17% drop, reflecting the pressure from emerging competitors in the AI space. Although Nvidia’s stock has seen some recovery, it remains under pressure, trading 3.79% lower over the past five days. The Nasdaq 100 exchange-traded fund (Invesco QQQ Trust) also saw a dip following the DeepSeek news, though it has since rebounded, rising 2.22%.
Dalio’s insights reflect a growing sense of unease among investors in the tech sector, particularly those who are deeply invested in AI stocks. As the competition intensifies, navigating pricing strategies and economic trends will be essential for long-term success. With AI and disruptive technologies rapidly evolving, Dalio’s advice to focus on productivity, innovation, and valuation has never been more pertinent.
