Oaktree Capital Marks: Investors underestimate the impact of AI

# Zhao Ying

Source: WallStreetCN

Howard Marks, co-founder of Oaktree Capital, warned: AI is making the world more unpredictable than ever before, and most investors have not yet realized the full depth of its impact. He used Block’s layoff of 4,000 employees—nearly half its total headcount—as an example to argue that the market is seriously underestimating AI-related risks. Marks stressed that, amid the disruptive shock of AI, **equities are better than bonds**: “If you are taking fundamental business model risk, you should be rewarded as an owner.”

Artificial intelligence is making the world more unpredictable than ever before, yet most investors have not grasped the full magnitude of this shift.

Howard Marks, co-founder of Oaktree Capital Management, said at a capital markets industry conference in New York on Tuesday that AI’s influence is inseparable from its unpredictability, and it is no longer enough for investors to set strategies solely based on forecasts of future trends.

He cited Block, owned by Jack Dorsey, which announced last month it would cut about 4,000 jobs—roughly half its workforce—as clear evidence that markets are severely underappreciating AI’s impact.

Marks argued that when facing fundamental business model risks brought by AI, holding equity in AI-related companies is preferable to providing debt financing. Investors should participate as owners rather than fixed-income investors.

## AI’s unpredictability: both power and risk

In an interview with Bloomberg TV anchor Lisa Abramowicz, Marks said the very forces that give AI its importance also endow it with elusive uncertainty—including what it will or will not do, and to what extent it will replace human jobs.

He backed his view with concrete examples, noting that Block, owned by Jack Dorsey, laid off roughly 4,000 people—about half its total staff—last month. He asked:

“How many people around the world truly understand what this means?”

“Most people in the investment world decide what to do based on their view of the future,” he said. “That is not sufficient.”

Marks also pointed out that the rise of AI has intensified investor concerns about insufficient transparency in private markets.

## Historical patterns of new technology bubbles

Having witnessed multiple boom-and-bust cycles, Marks remains wary of market euphoria around new technologies. He said new things always capture people’s imagination and are easily sold to the public—and precisely because they are new, their flaws have never been tested in practice.

“There has never been a steel bubble or a hamburger bubble,” he said. “But new technologies or new financial innovations get people to buy on promise, without understanding the downside.”

## Allocation logic for AI investing: equities over credit

On specific investment strategy, Marks clearly favored equity investments. He argued that if investors bear the fundamental business model risk of AI companies, they deserve to be rewarded as owners, not as fixed-income investors.

“If you’re taking the fundamental business model risk,” he said, “shouldn’t you get rewarded by being an owner, rather than a fixed-income investor?”

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