Billionaire Investor Howard Marks Warns Against Overconfidence In AI Stocks: 'Every Bubble Starts From Widespread Conviction'

In a recent interview, billionaire investor Howard Marks cautioned against overconfidence in Artificial Intelligence (AI) stocks, stressing that the technology’s transformative potential does not make it immune to market crashes.

What Happened: Marks, the co-founder of Oaktree Capital Management, shared his thoughts on AI stocks with CNBC on Tuesday. He acknowledged the technology’s potential to revolutionize the world but warned that this alone does not guarantee the success of its underlying assets, reported Business Insider.

“Every bubble starts from widespread conviction,” Marks said. “Everybody believes A, they bid the beneficiaries of A up to the moon. It turns out, it’s overdone.”

Marks drew parallels between the current AI investment trend and the dot-com bubble of the late ’90s, where the internet’s emergence led to a surge in stock prices. However, many of these stocks ended up being worthless.

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Despite recognizing AI’s potential, Marks emphasized the difficulty in determining the appropriate reflection of AI in investment portfolios. He also expressed skepticism towards macro predictions, warning against over-reliance on Wall Street forecasts.

Why It Matters: Marks’ cautionary stance on AI stocks is in line with his previous skepticism towards market trends. Earlier this year, he expressed skepticism about the intrinsic value of Bitcoin BTC/USD and gold, suggesting high-yield bonds as a safer investment option.

Other market veterans have also sounded the alarm on the current market climate. In February, investing veteran Bill Smead warned that the AI stocks mania could be headed to a bad ending, cautioning against the allure of popular stocks and the AI boom.

These warnings come in the wake of the AI-led tech stock bubble that has seen a significant sell-off since Apr. 12, raising concerns about the sustainability of the current market trend.

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