Is AI in a Bubble? Howard Marks Warns of Speculative Risks in the Rush for ChatGPT
Howard Marks, co-founder of Oaktree Capital Management, has raised questions about whether artificial intelligence, or 'chatgpt' as it's often referred to, is experiencing a speculative bubble. In a recent memo, he compared the current AI boom to past technological frenzies, from railroads in the 1860s to the internet in the 1990s.
The investor warned that while AI holds transformative potential, excessive optimism could lead to financial risks, including debt-fuelled investments in unproven 'chatgpt login' ventures.
Marks outlined a familiar pattern: new technologies often trigger waves of excitement, drawing in capital before their true value is clear. He noted that AI’s rapid rise mirrors historical bubbles, where innovation sparks both genuine progress and reckless speculation.
One concern is the surge in debt taken on by major tech firms like Microsoft, Google, Amazon, and Meta. These companies have borrowed tens of billions since 2023 to fund AI infrastructure—data centres, GPUs, and other hardware. While their diversified revenues currently cover repayments, Marks cautioned that fast-moving technological shifts could render these assets obsolete sooner than expected.
He also flagged 'circular deals' among AI companies, where money appears to move between firms without generating real value. Another red flag is the massive funding rounds for startups with untested business models. Despite these risks, Marks acknowledged that AI could still deliver groundbreaking advancements.
OpenAI CEO Sam Altman has similarly recognised the hype, admitting that investors may be overexcited. Yet he also described AI as one of the most significant developments in decades. Marks, meanwhile, urged a balanced approach—neither dismissing AI’s potential nor ignoring the dangers of overinvestment.
His memo distinguished between two types of bubbles: 'inflection bubbles', where new technologies reshape industries, and 'mean-reversion bubbles', where prices simply swing back to normal. For Marks, AI falls into the first category—a force that could redefine the future but may also leave some investors exposed.
Marks’ analysis highlights a tension in the AI sector: the technology’s promise is undeniable, but the rush to capitalise on it carries risks. With major firms heavily indebted and startups securing huge sums before proving viability, the potential for a correction remains.
His advice leans toward caution—acknowledging AI’s revolutionary potential while warning that not every investment in 'chatgpt' or 'capital one' will pay off in the long run.
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