Oaktree Capital's Marks: Investors Underestimate the Impact of AI

Artificial intelligence is making the world unprecedentedly unpredictable, and most investors have yet to realize the depth of this impact. Howard Marks, co-founder of Oak Tree Capital Management, stated at a capital markets industry conference in New York on Tuesday that the influence of AI is inseparable from its unpredictability; it is far from sufficient for investors to formulate strategies solely based on their judgments of future trends. He cited the example of Block, under Jack Dorsey, announcing layoffs of 4,000 people last month—about half of its total workforce—pointing directly to the market's severe underestimation of the impact of AI. Marks believes that in the face of fundamental business model risks brought by AI, holding equity in AI-related companies is preferable to providing them with debt financing, and investors should participate as owners rather than fixed-income investors. The Unpredictability of AI: Both Power and Risk In an interview with Bloomberg TV host Lisa Abramowicz, Marks stated, the power that gives importance to AI also endows it with elusive uncertainty—whether it will do what it will do, what it will not do, or to what extent it will replace human jobs. Marks supported his viewpoint with specific data. He mentioned that Block, under Jack Dorsey, announced layoffs of about 4,000 people last month, which accounts for about half of its total workforce, and questioned, "How many people globally truly understand the significance of this?" "Most people in the investment community decide their course of action based on their judgments of the future," he said, "and that is not enough." Marks also pointed out that the rise of AI has intensified investors' concerns about the lack of transparency in the private market. Historical Patterns of New Technology Bubbles Having witnessed multiple cycles of boom and bust, Marks remains vigilant about the market frenzy triggered by new technologies. He stated that new things always inspire people's imagination and are easily marketed to the public, and precisely because they are new, their flaws have never had the opportunity to be exposed in practice. "There has never been a steel bubble or a hamburger bubble in history," he said, "but new technologies or new financial innovations can lead people to buy in based solely on a promise without understanding the downside risks." The Allocation Logic of AI Investment: Equity Over Debt In terms of specific investment strategies, Marks clearly expressed his preference for equity investment. He believes that if investors are taking on the fundamental business model risks of AI companies, they should receive corresponding returns as owners rather than participating as fixed-income investors. "If you are taking on the fundamental business model risk, shouldn't you be rewarded by becoming an owner rather than a fixed-income investor?" he said