Billionaire Ray Dalio Raises Valuation Concerns As DeepSeek's New Model Hits Nvidia Stock: 'A Great Company That Gets Expensive Is Much Worse Than A Bad Company That's Really Cheap'

Ray Dalio, founder of Bridgewater Associates, in a conversation with David Friedberg on the All-In Podcast, highlighted the importance of pricing in investment strategies led by “productivity growth drivers,” particularly in the context of artificial intelligence, and global economic shifts.

What Happened: Dalio’s comments come as companies like DeepSeek are making waves in the tech sector. The billionaire investor stressed that focusing solely on “good” companies can be a pitfall.

“A great company that gets expensive is much worse than a bad company that’s really cheap,” he warned. Dalio urged investors to prioritize value and consider pricing dynamics, especially in the current economic climate.

Dalio drew parallels to the 1998-99 period, citing concerns about high asset prices in “hot” sectors driven by productivity growth, coupled with a rising interest rate environment. He cautioned against excessive leverage, noting that “everyone is leveraged long,” and emphasized the crucial role of diversification in mitigating risk.

“I think the superscalars in this world have risk issues. Like Nvidia,” Dalio added.

He advised investors to focus on productivity, innovation, and disruptive technologies, but always with a keen eye on pricing and global economic trends. He stressed the importance of identifying and investing in those who are driving positive change through application development and usage.

Why It Matters: This comes after Chinese AI startup DeepSeek headlined the news last week. It garnered attention after claiming its DeepSeek-V3 model was trained for less than $6 million using Nvidia H800 chips, according to a paper released last month. The application has since surged in popularity, surpassing ChatGPT to become the top-rated productivity app on Apple’s App Store.

While some analysts have expressed skepticism regarding the accuracy of DeepSeek’s reported training costs, there’s a general consensus that its development was significantly less expensive than comparable American models.

Dalio emphasized the competitive landscape, noting, “I think the Chinese are a bit behind in the chips, but they are ahead in the applications.” He predicted a surge in inexpensive Chinese-made goods incorporating these chips, leveraging the country’s dominant position in global manufacturing.

“They own 33% of the world’s manufactured goods, which is more than combined U.S., Japanese, and German manufactured goods,” he stated.

Price Action: Shares of Nvidia Corporation NVDA fell over 17% last week on Monday after DeepSeek’s V3 topped Apple Inc’s AAPL PlayStore charts. It has recovered since then and is down by 3.79% over the last five trading days. The stock was 3.76% lower in premarket after President Donald Trump imposed tariffs on three of its major trade partners.

The exchange-traded fund tracking Nasdaq 100, Invesco QQQ Trust, Series 1 QQQ rebounded and rose 2.22% over the last five days but it was down 1.76% to $513.08 in the premarket.

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