Ray Dalio Warns AI Bubble Could Impact AI Crypto Coins

Key Insights

• Ray Dalio warned that artificial intelligence valuations may be approaching bubble territory.
• AI-focused stocks and ETFs have attracted billions of dollars as investor enthusiasm accelerates.
• AI crypto tokens could face pressure if sentiment toward the sector weakens.

Billionaire investor Ray Dalio has warned that artificial intelligence valuations may be reaching unsustainable levels, raising concerns about a possible correction across the sector. The founder of Bridgewater Associates said investor enthusiasm resembles previous market booms where strong technology trends eventually became disconnected from fundamentals.

His comments arrive as artificial intelligence companies continue attracting capital at an unprecedented pace. Publicly traded AI firms have surged this year, while private companies such as OpenAI and Anthropic command valuations measured in hundreds of billions of dollars.

If the sector experiences a broader correction, AI-related cryptocurrencies could also face pressure after posting some of the strongest gains in the digital asset market.

One of the most influential people in the financial industry is warning of an imminent AI bubble burst. In a statement, he said that the boom will eventually find no room to run.

He said that as the technology continues firing on all cylinders. For example, Anthropic, the creator of Claude, recently closed the fundraising that valued it at over $900 billion. Three months before that, the company raised funds at a $300 billion valuation.

At the same time, AI companies in the United States, Japan, South Korea, and Taiwan are soaring. Sandisk stock has jumped by over 4,000% in the last 12 months. Companies like Micron, SK Hynix, and Samsung have entered the highly exclusive trillion-dollar club, and AMD is set to do the same soon. There are now 12 technology companies with a market capitalization of over $1 trillion.

Investors have embraced the Fear of Missing Out (FOMO) in the AI sector as evidenced by the rising ETF inflows this year. For example, data shows that the Vanguard S&P 500 (VOO) ETF has crossed the $1 trillion market cap this year.

Most notably, the Roundhill Memory ETF (DRAM), which was launched in April, has become the fastest-growing ETF ever. It has now accumulated over $15 billion in assets.

Technical analysis suggests that AI stocks will reverse in the coming months as investors start to capitulate. A good way to look at this is to consider the Global X Artificial Intelligence & Technology ETF (AIQ). This is a multi-billion-dollar fund that tracks the biggest companies in the industry.

Its constituents are companies like Apple, Oracle, Taiwan Semiconductor, Broadcom, Cisco, Intel, and AMD. It also tracks companies like Nvidia, Google, and Amazon.

The chart below shows that it has become highly overbought, with the Relative Strength Index (RSI) soaring to 76. Also, popular oscillators like the MACD and the Stochastic Oscillator have moved to the extreme overbought zone.

At the same time, the index has moved well above the 50-day and 100-day Exponential Moving Averages (EMAs). In most cases, this is a sign of bullish momentum.

The challenge, however, is that it may go through a mean reversion, a situation where an asset moves back to its historical averages. If this happens, the ETF may drop to $58.

AI crypto coins have surged this year. For example, Venice Coin has jumped by over 1,800% from its lowest point in December last year. NEAR Protocol price has soared by 175% from the year-to-date low, while Humanity jumped by over 700% from the year-to-date low. Other top AI coins like Worldcoin and Akash Network have also surged.

These coins have soared because of the ongoing AI boom and the upcoming IPOs, including companies like OpenAI, Anthropic, and SpaceX. Combined, these companies are valued at over $4 trillion.

Therefore, there is a likelihood that the AI coins will continue doing well in the near term and then retreat when the IPOs happen. Besides, most of these coins are in extremely overbought levels and are much higher than their moving averages.

If this happens, investors are likely to rotate back to traditional tokens like Bitcoin and Ethereum, which have crashed this month.

The post AI Crypto Coins at Risk if Ray Dalio’s AI Bubble Warning Comes True appeared first on The Market Periodical.