Artificial intelligence is making the world more unpredictable than ever, yet most investors have not grasped the full depth of this disruption. Howard Marks, co-founder of Oaktree Capital Management, stated at a capital markets industry conference in New York on Tuesday that AI's influence is matched by its unpredictability. He argued that investment strategies based solely on forecasts of future trends are no longer sufficient. He pointed to the recent announcement by Jack Dorsey's Block to cut 4,000 jobs, approximately half of its workforce, as a concrete example of the market significantly underestimating AI's impact. Marks believes that when facing the fundamental business model risks introduced by AI, holding equity in AI-related companies is superior to providing them with debt financing. He suggests investors should participate as owners rather than as fixed-income investors.

The Unpredictability of AI: A Source of Power and Risk In an interview with Bloomberg Television host Lisa Abramowicz, Marks noted that the same force that gives AI its significance also endows it with an elusive uncertainty—regarding what it will do, what it will not do, and to what extent it will replace human jobs. Marks supported his view with specific data. He referenced Block's announcement last month to cut around 4,000 jobs, roughly half of its total staff, and questioned, "How many people globally truly understand the significance of this event?" "Most people in the investment world decide their course of action based on their judgment about the future," he said. "That is not enough." Marks also indicated that the rise of AI has intensified investor concerns about insufficient transparency in private markets.

Historical Patterns of New Technology Bubbles Having witnessed multiple cycles of boom and bust, Marks remains cautious about market fervor driven by new technologies. He observed that new things always capture the imagination and are easily marketed to the public. Precisely because they are new, their flaws have never had a chance to be exposed in practice. "History has never seen a steel bubble or a hamburger bubble," he said. "But new technologies or new financial innovations can lead people to buy in based on mere promises, without understanding the downside risks."

Allocation Logic for AI Investment: Equity Over Debt Regarding specific investment strategy, Marks clearly expressed a preference for equity investments. He contends that if investors are taking on the fundamental business model risk of AI companies, they should seek returns as owners, not as fixed-income participants. "If you are taking basic business model risk, shouldn't you get paid for it by being an owner rather than a fixed-income investor?" he said.