Investing legend Howard Marks sees warning signs in today’s AI market but stops short of calling it a full-blown bubble.
In a new interview at the Global Money Talk in South Korea, the investor who called the dot-com bubble on January 1st, 2000, says market optimism is undeniably high as investors bet on artificial intelligence to transform the economy.
The co-founder of Oaktree Capital points to the concentration risk in mega-cap tech, citing the Magnificent 7 and the weight they now hold in the index.
“I think in June, a few months ago, I put out a memo called the Calculus of Value Now. I said we’ve gone from elevated to worrisome, and I think that there’s so much optimism in prices, the average price earnings ratio on the S&P 500 is quite high relative to history, and there’s so much enthusiasm about AI, and so much is riding on AI: the future of the economy, all this money that’s being spent on capital expenditures and of course, the level of the stock market dominated the S&P, dominated by seven tech companies, the Magnificent Seven, which account for roughly 40% of it and most of the gains.”
While Marks says the AI-driven market is flashing signs of excess, he notes that the exuberance hasn’t hit a fever pitch, prompting him to avoid calling the latest boom a bubble.
“However, it’s not the worst I’ve ever seen. I’m not convinced that it can’t go up further. And I don’t use the word bubble at this point. Bubble, a bubble is a mania. It’s a temporary insanity. And I don’t detect that quite yet.”
Blackstone Jon Gray echoes Marks’s sentiment, saying today’s AI stocks may be elevated in terms of valuation, but nowhere close to the premiums paid during the dot-com era.
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