Is the AI Bubble About to Pop? Here's How Smart Money Is Hedging

Ray Dalio just dropped a hot take: AI spending is entering bubble territory. But here’s the thing—he’s not telling you to panic-sell yet.

On CNBC Thursday, the Bridgewater founder explained that high valuations alone don’t trigger crashes. You need a specific catalyst. His bet? Could be wealth taxes, not rate hikes. And spoiler alert: that catalyst hasn’t hit the market yet.

Why NVIDIA’s Rally Matters (and Why It Could Reverse)

NVIDIA jumped 5% after November 19 earnings, with CEO Jensen Huang doubling down on AI growth momentum. Sounds bullish, right? Except the stock lost 3.2% the next day. Welcome to bubble dynamics—fast money in, fast money out.

The real worry: The S&P 500 is now 25% tech-heavy. If AI implodes, the whole index bleeds.

The Hedging Play

Dalio’s solution? Go boring and boring works.

Gold (GLD): Up 52.7% YTD, down only 0.6% last month. Classic safe-haven move during risk-off cycles.

Healthcare (XLV): Performs better in high-volatility environments. 8 bps fee, 1.60% yield. Boring but defensive.

Tail Risk (TAIL): Buys out-of-the-money puts for downside protection. 59 bps fee, 2.48% yield. Literal insurance against the crash.

Bear ETF (HDGE): Shorts overextended equities. 380 bps fee (ouch), but 7.25% yield if markets tank.

Global High-Yield Bonds (PGHY): USD-denominated debt from non-US issuers. 35 bps, 6.63% yield. Diversification outside tech concentration.

The Bottom Line

Bubble? Yes. Reason to exit? Not yet. Reason to diversify? Absolutely. The question isn’t if it pops, but when—and whether you’re hedged when it does.