Ray Dalio says the U.S. stock market 'doesn't look very bubbly'

Published Thu, Feb 29 20243:09 PM ESTUpdated Thu, Feb 29 20244:19 PM EST

Key Points

Investor Ray Dalio believes the U.S. stock market is not in a speculative bubble.
The founder of Bridgewate analyzed the market based on his bubble criteria.

Billionaire investor Ray Dalio believes the U.S. stock market is not in a speculative bubble. The founder of Bridgewater, one of the world's largest hedge funds, analyzed the market based on his bubble criteria, which includes valuation, sentiment, new buyers and unsustainable conditions. "When I look at the U.S. stock market using these criteria, it — and even some of the parts that have rallied the most and gotten media attention — doesn't look very bubbly," he said in a new LinkedIn post published Thursday. .SPX 1Y mountain S & P 500 The S & P 500 is wrapping up its fourth winning month after hitting a new all-time high on the back of continued enthusiasm surrounding artificial intelligence. The seemingly relentless rally, led by the so-called Magnificent Seven stocks, has led some to worry about the sustainability of the latest bull move. Dalio said the valuation of the Magnificent Seven names is slightly expensive but not excessively so. "The Mag-7 is measured to be a bit frothy but not in a full-on bubble," he wrote. "That said, one could still imagine a significant correction in these names if generative AI does not live up to the priced-in impact." The widely followed investor compared artificial intelligence darling Nvidia with Cisco during the dot-com bubble in the late 1990s. While their price trajectory look similar, the path of cash flows has been very different. Nvidia's two-year forward price-to-earnings ratio is around 37 today, while Cisco's multiple hit 100 at the height of the internet bubble, Dalio noted. "The market was pricing in far more speculative/long-term growth than we see today," he said. Don't miss these stories from CNBC PRO: Berkshire Hathaway is one of the most overbought stocks on Wall Street. Here are the others Want an Nvidia alternative? These 6 chip suppliers look set to gain big from the AI boom Jefferies says buy this under-the-radar software stock with ties to Nvidia and nearly 20% upside 'Opportune time to invest in real estate': Pros name 5 REITs to buy right now