Howard Marks is not convinced the AI boom is a bubble

Plenty of professional investors are warning that AI trading has inflated a stock market bubble. Howard Marks, co-founder and co-chairman of Oaktree Capital Management, is not ready to join that chorus, according to Bloomberg.

His answer is more nuanced than a simple yes or no. Marks sees high valuations, speculative funding and heavy debt in the AI trade. He just doesn’t think those ingredients have produced the full recipe for a classic bubble yet.

How Marks has framed the AI debate

Marks laid out his initial view in a CNBC interview on October 13, 2025. He said AI valuations were high, but not yet a sign of the psychological mania that defines true bubbles.

He expanded on the theme in a December 2025 memo titled “Is it a bubble?” In it, Marks acknowledged exceptional exuberance across the sector. He noted that AI stocks had accounted for a significant portion of S&P 500 gains, a reminder of how much the broader market now leans on a single theme.

He also pointed to seed funding of more than $1 billion flowing to unproven startups. Marks flagged heavy corporate debt levels as well, tied to the infrastructure buildout behind AI.

Even with all of that on the table, Marks did not confirm a bubble. Instead, he described the environment as a potential “inflection bubble.”

Two kinds of bubbles

Marks drew a line between an inflection bubble and a mean-reverting bubble. A mean-reverting bubble sees prices rocket up, enthusiasm evaporate, and things snap back to where they started with little lasting change. An inflection bubble forms around a genuine technological shift that can reshape the economic landscape, and does not necessarily lead to immediate wealth destruction.

Marks returned to the subject in a February 26, 2026 memo titled “AI hurtles ahead.” He described AI as underestimated in its potential and suggested it may evolve from a productivity tool into a substitute for labor.

Yet his enthusiasm for the technology did not extend to the prices attached to it. Marks cautioned that AI investments may not be fairly priced, and stressed that technological progress alone does not justify inflated valuations.

What this means for investors

Marks’ practical advice recommended a balanced approach, arguing against going “all-in” on AI and against pulling out of the market entirely.

Marks also raised concerns that extend beyond portfolios. He warned of the potential for job losses and wealth destruction in the event of a market correction.