Chipmaker Nvidia Corp., along with other artificial intelligence-linked stocks and exchange-traded funds, have plunged in 2025 despite the growing enthusiasm surrounding the sector. This expert who predicted the dot-com crash compares the AI-linked enthusiasm to instances that “sometimes leads to bubbles”.
What Happened: After the release of his latest memo, ‘On Bubble Watch,’ in early January, Howard Marks, the co-founder and co-chairman of Oaktree Capital Management, spoke about how AI is poised to change the world in a podcast titled ‘Behind the Memo – On Bubble Watch’ with Harry Whitelaw.
According to Marks, the novelty of AI places no limits on the potential and enthusiasm surrounding the sector. Having “no historical” base also aids to the unending enthusiasm for AI.
Highlighting these conditions, Marks said, “That's a great precursor for the kind of enthusiasm that sometimes leads to bubbles.”
“The thrill of the new thing and the fear of missing out is an incredibly powerful combination. I've seen it at work many times and it'll never stop, in my opinion,” he added.
These predictions came true as the AI-linked stocks and sectors have underperformed in 2025. Despite the emergence of DeepSeek, which according to many experts will only fuel the demand of AI, the weakness in the sector is evident after unbridled enthusiasm in 2024.
| Stocks | YTD Performance | One Year Performance |
| Nvidia Corporation NVDA | -9.76% | 46.42% |
| Apple Inc. AAPL | -1.01% | 37.86% |
| Microsoft Corp. MSFT | -5.16% | -4.32% |
| Amazon.com Inc. AMZN | -3.75% | 19.36% |
| Alphabet Inc. Class C GOOG | -9.71% | 28.26% |
| Meta Platforms Inc. META | 11.51% | 34.13% |
| Tesla Inc. TSLA | -22.74% | 55.76% |
| Palantir Technologies Inc. PLTR | 12.92% | 253.18% |
| Oracle Corp. ORCL | 0.02% | 45.59% |
Broadly, the AI-linked ETFs have also largely underperformed in 2025.
| ETF Name | YTD Performance | One Year Performance |
| iShares US Technology ETF IYW | -3.06% | 14.53% |
| Fidelity MSCI Information Technology Index ETF FTEC | -3.80% | 13.40% |
| First Trust Dow Jones Internet Index Fund FDN | 1.09% | 20.90% |
| iShares Expanded Tech Sector ETF IGM | -2.19% | 16.18% |
| iShares Global Tech ETF IXN | -2.50% | 9.97% |
Why It Matters: Famed investor Marks, who foresaw the dot-com bubble, once again sounded an alarm on Jan. 7, with his latest memo, ‘On Bubble Watch‘. He points to several “cautionary signs” in the current market, including soaring valuations, AI hype, and heavy reliance on mega-cap tech stocks.
Marks also highlights research from JP Morgan Asset Management showing that high valuations like today’s often precede lackluster returns over the following decade. He cautions that investors should not ignore these warning signs, especially the elevated market valuations. Essentially asking to proceed with caution.
Price Action: The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, rose on Friday. The SPY was up 1.56% to $594.18, and the QQQ also advanced 1.56% to $508.10, according to Benzinga Pro data.
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Photo courtesy: Oaktree Capital Management
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