Howard Marks Says the AI Boom Is Entirely Unpredictable

Artificial intelligence might end up having a bigger economic impact than any technology before it, but Oracle of Finance Howard Marks says actual demand is impossible for investors to forecast.

One of today's most respected investors, Marks manages more than $200 billion and has delivered long-term returns that, at 19% per annum net of fees, are nearly double the S&P 500.

In a recent memo, Marks says AI usage is growing quickly but is also impossible to predict:

The speed and scale of improvement mean it’s incredibly hard to forecast demand for AI. Adoption today may have nothing to do with adoption tomorrow, because a year or two from now, AI may be able to do 10x or 100x what it can do today.

How can anyone say how many data centers will be needed? And how can even successful companies know how much computing capacity to contract for?

— Howard Marks

Marks is suggesting AI growth could be huge, but some experts believe another outcome altogether is more likely. Yann LeCun, Meta's former Chief AI Scientist, says large language models will never learn to think. If that's true, demand for AI might fail to grow much at all.

With such a wide range of outcomes all equally plausible, Marks concludes that it pays to be cautious. AI investors should be humble and protect themselves from downsides.

I hope you enjoyed this post. Read all of my stories about Howard Marks on My Daily Oracle.

And, if you want a deeper dive, get a copy of The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor. It combines Marks's writing with counterpoints from four other renowned investors, including Joel Greenblatt of Gotham Capital.

We'll learn about AI from Marks every day this week. Tomorrow, he teaches us how to spot a bubble.

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