Bridgewater founder Ray Dalio has warned that the US could face a debt crisis within three years due to weakening demand for government bonds from China and Japan, the two largest foreign holders of US debt. The yield on 10-year Treasuries remains around 5.3%, close to levels last seen in 2002.

China Reduces Treasury Holdings Amid Economic and Geopolitical Risks

According to Dalio, China does not want to continue increasing its investments in US Treasuries given current economic and geopolitical risks.

Japan Cuts Positions and Prepares Capital Repatriation

Japan has already started to reduce its holdings of US debt and plans to repatriate some of its capital.

Major Tech Firms Face Greater Challenges Raising Funds for AI

Dalio notes that major technology companies are finding it more difficult to finance large-scale AI investments. While they previously relied more on equity issuance, they are now turning increasingly to debt financing. He sees the potential for an AI bubble to burst, for example, due to the need to repay debt or the possible introduction of a wealth tax.