Legendary investor Howard Marks has drawn powerful parallels between the current market excitement over artificial intelligence (AI) and the 1999 dot-com bubble, warning that it's nearly impossible to know who the long-term winners will be.
Market Has Gone From ‘Elevated’ To ‘Worrisome’
Speaking with 3PROTV’s Global Money Talk in South Korea, the Co-Chairman of Oaktree Capital Management said the U.S. stock market has moved from “elevated to worrisome.”
However, he stopped short of calling it a full-blown bubble, describing the situation as “lofty but not nutty” and not yet a “mania.”
Marks cautioned that while AI will undoubtedly change the world, this fact does not guarantee investment success.
“In 1999, we thought that the internet would change the world… and yet the vast majority of the internet companies of 1999 ended up worthless,” Marks said. He argued the same logic applies to AI, noting the market is “factoring in optimism” with “so much enthusiasm about AI.”
AI Will Change The World, But No Guarantee Of Profit
The core uncertainty, Marks explained, lies in separating a technology’s impact from its profitability. He questioned whether profits will be captured by the AI creators, the companies that use AI, or simply competed away and passed on to customers.
“I think there’s a near 100% probability AI will change the world,” Marks stated, “but I think there’s much less than 100% probability that investing in any given AI company or sector today will be profitable.”
Marks On His 35-Year Memo Philosophy
This uncertainty reinforces Marks’s career-long investment philosophy, which has guided his famous memos for 35 years: focus on risk control.
“Our motto is if we avoid the losers, the winners take care of themselves,” Marks explained. He noted that while the S&P 500 is “dominated by seven tech companies,” investors must remember the difference between a world-changing technology and a profitable investment.
Experts See S&P 500 Breaching 7,000 Despite Bubble Concerns
Ed Yardeni maintains his S&P 500 target of 7,000, anticipating a "good solid Santa Claus rally" through the end of the year, saying "we're in a bull market.”
Additionally, Tom Lee reaffirmed his S&P 500 target, stating, "I think all of this means that the S&P can close at least at 7,000," adding, "I actually think that's a low number."
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and the Nasdaq 100 index, respectively, closed mixed on Friday. The SPY was down 0.016% at $671.93, while the QQQ advanced 0.076% to $608.86, according to Benzinga Pro data.
The futures of the S&P 500, Nasdaq 100, and Dow Jones were trading higher on Monday after a mixed close on Friday. Here are a few AI-linked ETFs that investors could consider.
| ETF Name | YTD Performance | One Year Performance |
| iShares US Technology ETF (NYSE:IYW) | 24.83% | 27.51% |
| Fidelity MSCI Information Technology Index ETF (NYSE:FTEC) | 21.88% | 25.32% |
| First Trust Dow Jones Internet Index Fund (NYSE:FDN) | 10.53% | 16.36% |
| iShares Expanded Tech Sector ETF (NYSE:IGM) | 24.99% | 28.93% |
| iShares Global Tech ETF (NYSE:IXN) | 25.11% | 28.47% |
| Defiance Quantum ETF (NASDAQ:QTUM) | 29.73% | 66.04% |
| Roundhill Magnificent Seven ETF (BATS:MAGS) | 19.81% | 27.01% |
Read Next:
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo Courtesy: Xharites on Shutterstock.com
