Is It a Bubble?

In this memo, Howard Marks explores the possibility of an AI bubble, drawing parallels to historical bubbles like the railroad boom and the internet bubble. He discusses the potential benefits of bubbles in driving technological progress, distinguishing between "inflection bubbles" and "mean reversion bubbles." Marks examines the current AI landscape, highlighting areas of uncertainty, such as the future profitability of AI companies and the potential for "circular deals." He also raises concerns about the use of debt in financing AI infrastructure and the potential for job displacement due to AI. Marks concludes that while AI has transformative potential, the current enthusiasm may be excessive, and a moderate, selective, and prudent approach to investing in AI is advisable. He also touches on the broader societal implications of AI, particularly regarding joblessness and the need for social and political adjustments.