How should we behave towards dreamy people?

I genuinely don't know how to respond to people with unrealistic dreams.

1. If I support them, it will drag them deeper into the swamp.
2. If I tell them it's wrong, they think I'm judging them.

I'm currently rebuilding my social circle. Should I just avoid these kinds of people? Because, in the end, what I felt was compassion fatigue. I can change the topic to something fun, but that is just another way to ignore them. I can't maintain this approach for a long time either.

You can also think this question as "what to do people with bad karma".