Spending on artificial intelligence by large corporations will continue to ⁠grow exponentially and reshape the economy, Bridgewater Associates' co-chief investment officers said in a client note Monday.

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AI has emerged as the key driver of global corporate investment and a central force behind ‍the market rally, altering capital spending plans across ‍industries.

A surge in corporate spending across the AI supply chain, from data center infrastructure to chips ⁠and power, has helped lift equity markets even as worries grow over a potential market bubble and the boom's sustainability.

"Straightforward ​game-theoretic calculations make it unacceptable for these companies to accept falling behind rivals by even a few months of progress, so one company’s decision ‍to spend more aggressively on AI capex compels others to follow," the hedge fund's co-CIOs Bob Prince, Greg Jensen and Karen Karniol-Tambour wrote.

Global stocks swung sharply in the fall as growing concern over a potential AI stock bubble weighed on sentiment and heightened the risk of ⁠a selloff. Still, Wall ​Street’s main indexes ended ⁠2025 with double-digit gains, buoyed by strong investor demand for AI-linked stocks.

CIOs of Bridgewater, one of the world's biggest hedge funds with $175 billion of assets under management, said a surge in AI capital spending could increase inflation as higher demand pushes ‌up prices of items in its ecosystem, including chips and electricity.

They added that the dynamics could push up risks and create bubble-like ⁠conditions.

"Easy ​policy risks further ‍accelerating speculative equity market activity and the frenzy of deal-making and AI investment that’s already underway, creating a ripe ‍environment for a bubble, and risks enabling a cyclical overheating," the note said. ​​​​​