Bulls and doomers are both right, says Ray Dalio—AI will be ‘miraculous’ for productivity but fuel a ‘devastating’ bubble and wealth inequality

There’s a huge divide between how the world’s AI leaders view the transformative technology.

Some foresee a huge jobs boom and a new era of economic activity.

Others see the end of humanity.

Ray Dalio, famed investor and founder of Bridgewater Associates, says both optimists and pessimists are correct.

He believes the technology will produce unprecedented productivity benefits, but also further entrench wealth inequalities—as well as driving a massive stock market bubble.

“There’s a process in which great new technologies are something that everybody wants to invest in because they’re going to change the world, and then they over-invest in them, and they create debt, and they go through a certain dynamic, in a sense, that creates a bubble, that creates a bust,” Dalio said in a new video for the World Economic Forum.

“So simultaneously it is going to be one of the biggest productivity-enhancing, changing-the-world forces, and also a bubble that is going to have devastating effects on many people as it works itself through this.” Dalio’s argument isn’t without precedent: In the dotcom bubble, the Nasdaq rose 86% in 1999 alone .

By October 2002, it had fallen 77% from its peak, with trillions wiped off the market.

The web nonetheless turned out to be a transformative new medium.

That said, history tends to rhyme, rather than repeat itself.

There are fundamental differences between the current investment cycle and previous bubbles, Citi Wealth’s head of economics, Conrad DeQuadros, said in a note last month: “Contrary to the corporate profit margin squeeze seen during prior investment bubbles, aggregate margins today are holding near all-time highs … U.S. corporations enter this investment cycle from a position of profitability and balance sheet strength.” Jamie Dimon, CEO of JPMorgan Chase , has suggested that parts of the AI sphere are in bubble territory, rather than the entire ecosystem.

Dalio suggests something similar, saying that AI will lead to massive wealth for some.

“People who come up with great ideas to invent productive things receive capital that enables them to do that,” Dalio continued.

“And then as a result of that, that produces very large differences in wealth.