This week we are featuring a recent piece from Howard Marks of Oaktree Capital. Marks argues that AI is a real and consequential technology, but its payoff is uncertain on two fronts: which companies will actually profit, and whether today’s enormous capital spending will earn adequate returns. He says whether current prices are justified is “largely a matter of faith,” and he defines a bubble as irrational exuberance that drives overinvestment and inflated prices, which leaves open whether AI qualifies.

Marks flags concentration risk and a growing reliance on debt. A small group of AI-related companies has driven roughly two-thirds of S&P 500 gains since early 2024, creating an “unusually powerful fault line” through many portfolios. With AI’s financing needs heading toward about $1 trillion of new capital a year, he cautions that lenders must be “exceptionally vigilant” about circular financing, off-balance-sheet structures, and lease terms. His practical advice is to focus on price, consider how many things must go right for an investment to work, and act with “calibrated humility” rather than staying on the sidelines because the future is unclear.

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