- Marks welcomes the doubt. Recent AI-related market stumbles have somewhat burst the bubble of infallibility around the sector, Oaktree Capital Management co-chair Howard Marks told Bloomberg TV, adding that investors are now saying “let’s be a little more skeptical” and “that’s very healthy.”
- He calls AI a crowded trade. “Over the last couple of years, there has been great excitement and eagerness surrounding buying into or lending to AI,” Marks said, warning that “the standards have come down, prices have gone up. You have to be cautious in what you do.”
- The sums are hard to grasp. Companies in the AI arms race are raising trillions of dollars, and “a trillion is $1 a second for 31,000 years,” Marks said, adding that on whether there will be enough profit for attractive returns, “I think the answer is: Who knows?”
- Capital Group sees an adoption gap. Vice chair Jody Jonsson said there is a disconnect between what AI companies expect and how fast enterprises can adopt the technology, and that markets are “very concerned about the scale of the capital raising involved.”
What Happened?
Marks’s comments come as investors show less tolerance for tech companies whose core businesses are cooling beneath an unprecedented AI spending spree. Recent results from Alphabet and Amazon have fueled concerns that AI is eroding the businesses financing those investments. Marks, who wrote last year that he was on bubble watch, gained attention in January 2000 for his memo “bubble.com,” which warned of dot-com mania ahead of the bust.
Why It Matters?
When one of the most closely followed credit investors calls AI a crowded trade with falling standards, it adds weight to the debate over AI returns after last week’s tech selloff. Jonsson flagged a further risk in credit: much of the financing sits off balance sheet in unconsolidated vehicles, concentrated among a handful of companies that do business with one another. “The more that they lend their credit to others, the more fragile the system becomes,” she said. Investors are also questioning “whether there’s enough appetite in both equity and fixed income for all the issuance that’s coming.”
What’s Next?
Watch how markets absorb the coming wave of AI-related equity and debt issuance, whether hyperscalers can show returns on their spending, and whether credit spreads on AI-linked borrowers keep widening. Marks’s advice is that the uncertainty itself has to be priced in: “we have to take that into account when we make our decisions.”
Affected Tickers and Coins: GOOGL, AMZN, QQQ, BN
Source: Bloomberg
