Is there an AI bubble?
Many commentators have strong views on this question, but not Oaktree’s Howard Marks.
The question of bubbles is familiar territory to the veteran value investing billionaire, who published his memo Bubble.com just months before the dotcom bubble burst in 2000, and who warned of a “slow developing train wreck” before the global financial crisis.
His latest memo, Is it a Bubble?, is more circumspect. Yes, there is speculative activity and various causes for concern: AI stocks driving the S&P 500, start‑ups with “no clear product” raising billion‑dollar seed rounds, companies taking on debt to chase dominance, uncertainty over which firms will profit, and the ultimate scale of returns.
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At the same time, he notes why some insist “this time it’s different”: exploding demand for real AI products, rapidly growing revenues, no IPO (initial public offering) craze, and valuations for leading companies such as Nvidia that are high, but not crazy.
There is exuberance, but is it irrational?
Marks isn’t sure. “Since no one can say definitively whether this is a bubble, I’d advise that no one should go all-in without acknowledging that they face the risk of ruin if things go badly,” he cautions.
“But by the same token, no one should stay all-out and risk missing out on one of the great technological steps forward.”
A similarly measured stance in an FT op-ed annoyed many commenters, who demanded a clearer verdict, but is there not wisdom in such humility?
Lots of people pretend to know what’s coming, but admitting you don’t may be the soundest hedge against all the faux certainty.
