Marks argues that the core tenet of value investing—forecasting a firm’s earnings over a five-year horizon—breaks down when confronted with the pace of AI development. Unlike established industries where growth trajectories are more visible, AI firms like Anthropic are actively seeking to reinvent their business models, aiming to dwarf current products with entirely new classes of technology. Marks, who has navigated markets for six decades, describes the sector as uniquely inscrutable, citing its inherent autonomy and extreme speed of progress.
Howard Marks on the Inscrutability of AI Valuations
Can we really fool ourselves into thinking we know what a company like Anthropic will do five years from now? Howard Marks, co-founder of Oaktree Capital Management, believes the rapid, unpredictable nature of artificial intelligence makes traditional earnings-based valuation models nearly impossible to apply to the sector’s high-flying newcomers.
This skepticism toward the current hype cycle is shared by other industry veterans. Warren Buffett recently cautioned that the massive capital expenditures by hyperscalers like Meta and Microsoft represent genuine, substantial risk, while Michael Burry has pointed to aggressive accounting and circular deals as potential warning signs of an inflated bubble. Despite the recent volatility that saw the Nasdaq 100 drop nearly 5% in two days, Marks advises investors to resist market hyperactivity. Instead of reacting to daily fluctuations, he advocates for building a durable, long-term portfolio, echoing the patient strategies championed by Buffett.
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