AI market stumbles have increased scepticism, says Oaktree's Howard Marks
Oaktree Capital Management LP co-chair Howard Marks noted that investors are becoming more thoughtful following recent artificial intelligence sector setbacks.
Howard Marks, co-chair of Oaktree Capital Management LP, said that recent stumbles in the artificial intelligence market have burst the bubble of infallibility around the sector, according to a Mint report citing Bloomberg TV.
Marks stated that people are now being more thoughtful and sceptical, which he described as healthy. He noted that the trade has become crowded, with prices rising and standards coming down.
The comments come as investors show less tolerance for tech companies with cooling core businesses during an unprecedented AI spending spree. Recent results from Alphabet Inc. and Amazon.com Inc. have raised concerns that AI is eroding the businesses financing those investments.
Marks said firms are in an AI arms race, raising trillions of dollars. He suggested investors must ask if there is enough business and profit to produce attractive returns on these investments.
In a separate interview, Capital Group vice chair Jody Jonsson said a disconnect exists between AI company expectations and the pace of enterprise adoption. She noted that markets are concerned about the scale of capital raising and whether there is enough appetite in equity and fixed income.
Jonsson added that the debt picture is complicated because much financing sits off balance sheet in unconsolidated vehicles concentrated among a few companies. She said the system becomes more fragile as they lend their credit to others.