A growing number of billionaire investors are joining the debate over an artificial intelligence (AI) bubble, with Galaxy Digital founder Michael Novogratz believing the speculative frenzy in technology stocks will continue to heat up.

Novogratz said this week at a conference that AI is in "the biggest bubble of our lifetime," but investors should still participate. From Novogratz and Bridgewater founder Dalio to Bank of America analysts, a growing number of market participants believe AI trades are already showing signs of a bubble. The debate now centers on whether to keep chasing the rally or pull out.

The rise in AI-related stocks drove the S&P 500 to a record high on Tuesday, with Nvidia's market capitalization approaching $6 trillion. Although persistently rising long-term yields have cast a shadow over the outlook, Novogratz believes these headwinds are not enough to end this bull market.

Speaking at the Greenwich Economic Forum in Greenwich, Connecticut, Novogratz said: "Bubbles don't end like this. I know how bubbles end, and the endings are always spectacular, and this is far from spectacular enough."

Hyperscale cloud service providers are expected to spend more than $1 trillion on AI capital expenditures next year, and many tech giants are relying on debt to finance their investment plans. The market is increasingly questioning whether these companies can earn enough profit to sustain the AI infrastructure investment boom, heightening concerns about the risk of an overheated AI trade.

Market participants hold differing views on the potential consequences of the massive influx of capital into AI. Some investors are increasingly worried that aggressive spending and speculative mania resemble the internet bubble of the late 1990s. Others believe tech companies have strong financial resources and can afford AI data center construction spending, and that AI will ultimately deliver unprecedented productivity gains.

Novogratz believes that from a price-to-earnings perspective, AI-related stocks are still cheap. He said: "If you're not investing in AI, you might as well go home and stick your head in a bucket of ice water."

Meanwhile, Bridgewater founder Dalio warned at a conference in Singapore on Wednesday that AI is in a "classic bubble" that is approaching its bursting point as interest rates rise and investors need to cash in their paper wealth. Dalio said interest rates are continuing to climb, which is typically the point at which bubbles begin to burst. He said: "We are still before that stage, but we are getting closer. I think it's close."