Howard Marks, the co-founder of Oaktree Capital Management and one of the most respected voices in value investing, has undergone a significant transformation in his perspective regarding artificial intelligence. For years, the legendary investor maintained a cautious distance from the hype surrounding Silicon Valley’s latest technological breakthroughs. However, a recent deep dive into the capabilities of Anthropic’s AI model, Claude, has prompted Marks to issue a rare pivot in his investment philosophy.
In his latest communication to clients and the broader financial community, Marks admitted that his initial skepticism has been replaced by a cautious but profound optimism. The shift occurred after he engaged in a hands-on tutorial with Claude, an experience that demonstrated the technology’s ability to process complex financial data and generate nuanced reasoning that mirrors human logic. This realization has led Marks to conclude that AI is not merely a passing trend but a structural shift that will redefine how value is created and measured in the global economy.
While Marks has historically warned against the dangers of chasing market manias, he now argues that the current AI wave possesses a fundamental difference compared to previous bubbles. He notes that the speed of adoption and the tangible productivity gains being reported by early adopters suggest a genuine industrial revolution is underway. For the first time, Marks is encouraging investors to look beyond the immediate volatility of tech stocks and consider the long-term implications of machine learning on corporate efficiency.
Despite his newfound enthusiasm, the Oaktree co-founder remains a disciplinarian regarding risk. He suggests that investors approach the sector with a bifurcated strategy. First, he identifies the ‘arms dealers’ of the industry—the semiconductor giants and infrastructure providers—as the most direct beneficiaries. However, he warns that the valuations for these companies often bake in perfection, leaving little room for error. Marks suggests that the real opportunity may lie in the secondary beneficiaries: traditional companies that successfully integrate AI to widen their competitive moats and reduce operational costs.
One of the key takeaways from Marks’s reversal is his emphasis on human-machine collaboration. He does not believe that AI will replace the need for skilled investment managers. Instead, he views it as a powerful tool that will augment human judgment. In his view, the investors who thrive in the coming decade will be those who can synthesize the data-crunching power of models like Claude with the intuitive, qualitative assessment of market cycles that only a human can provide.
Marks also touched upon the psychological aspect of this technological shift. He cautioned that while the potential is vast, the ‘herd mentality’ still poses a significant threat to capital preservation. He urged investors to maintain their skepticism regarding companies that use ‘AI’ as a buzzword without having a clear path to monetization. The goal, according to Marks, is to find businesses where AI acts as a fundamental catalyst for earnings growth rather than a superficial marketing tool.
This 180-degree turn from a veteran known for his ‘memo’ style of cautious analysis marks a turning point for institutional sentiment. When a figure as historically conservative as Howard Marks signals a green light for exploring a high-growth technology, it suggests that the institutional floor for AI investment is much higher than previously thought. He concludes that while we are in the early innings of this transformation, the cost of ignoring the technology now outweighs the risks of measured participation.
As the financial world digests this shift, the message from Oaktree is clear: artificial intelligence has moved from the realm of science fiction into the essential toolkit of the modern value investor. Marks’s journey from skeptic to proponent serves as a case study in the importance of remaining open-minded in an era of unprecedented technological disruption.
