Howard Marks: AI Challenges Valuation

For Howard Marks, AI combines opacity and speed to the point of rendering five-year projections ineffective. The market recently punished AI spending by tech giants, while the Nasdaq 100 corrected before recalling its annual rise. At the same time, Anthropic filed its IPO application and announced its intention to continuously reinvent itself. Buffett and Burry, on the other hand, are calling for caution and a long-term perspective.

Targeted Sales and Nasdaq Correction Fuel Caution

Howard Marks cites the recent sales of Alphabet and Amazon shares, driven by concerns over their AI spending, as a sign that the sector's infallibility bubble has been punctured. During the sessions last Thursday and Friday, the Nasdaq 100 fell by about 1,400 points, or nearly 5%, but still shows an increase of about 13% since the beginning of the year. Since the end of 2022, the index has recorded a rise of about 160%, climbing from under 11,000 points to just below 28,400 points. In July, Warren Buffett highlighted the difficulty of identifying value when speculation prevails, while noting that companies like Meta and Microsoft are spending hundreds of billions of dollars on AI infrastructure. Michael Burry, for his part, warns that AI is a bubble destined to burst, citing over-investments, aggressive accounting, hidden debts, and circular agreements.

Valuing AI Without a Five-Year Compass, According to Howard Marks

Howard Marks believes that the valuation of AI companies eludes traditional methods. Value-focused investors typically seek to project earnings over five years to assess a stock, but he considers this approach inapplicable to most AI companies. He finds it difficult to predict what a company like Anthropic will do or earn in five years. After six decades of investing, he describes AI as unprecedented in its opacity, novelty, rapid progression, autonomy, and unpredictability. Marks speaks as co-founder and co-chairman of Oaktree Capital Management.

Anthropic Aims for IPO and Products Beyond Its Current Offerings

Anthropic, the creator of Claude, recently submitted a public offering application that could be among the largest ever recorded. The company's co-founders express their intention to continuously renew their model by developing new product categories that would surpass the economic value of their current offerings. They remind that advancements in AI enabled the development of chatbots in 2022, followed by coding agents last year, and believe that the use of agents for broader knowledge work and scientific discovery is gradually becoming viable this year. However, Howard Marks questions the ability to predict Anthropic's trajectory over five years, while deeming it still relevant to be exposed to the sector.

Long-Term Discipline Recommended, in the Spirit of Buffett

Howard Marks encourages investors to temper their enthusiasm and adopt a more thoughtful and skeptical attitude. He recommends building a portfolio designed to last and sticking to it, rather than reacting to the performance of a single session, reminding that "there is no reward for hyperactivity." Warren Buffett, whom he cites as a major influence, has advocated for long-term investing for decades: Berkshire Hathaway built large positions in Coca-Cola and American Express in the mid-1990s and has not altered them since. Marks has been publishing his memos for over 35 years. Buffett stepped down as CEO at the end of 2025 and as chairman in September.