Howard Marks Sounds Alarm on AI Stocks and Market Bubbles

In 2025, Nvidia Corp. and other stocks related to artificial intelligence (AI) have experienced significant declines. This downturn comes despite the increasing enthusiasm surrounding AI technologies. Howard Marks, a well-known investor and co-founder of Oaktree Capital Management, who famously predicted the dot-com crash, has drawn parallels between the current enthusiasm for AI and previous instances that led to financial bubbles.

Recent Developments: In early January, Marks released a memo titled ‘On Bubble Watch’ and discussed AI's potential to transform industries in a podcast with Harry Whitelaw. He emphasized that the excitement around AI, which lacks historical precedents, fuels boundless enthusiasm.

Marks remarked, “That's a great precursor for the kind of enthusiasm that sometimes leads to bubbles.” He highlighted the combination of new technology excitement and the fear of missing out (FOMO) as a potent catalyst for speculative behavior in the market. “I’ve seen it at work many times, and it will never stop, in my opinion,” he noted.

These insights from Marks have proven prescient, as AI-related stocks have struggled in 2025. Even with innovations like DeepSeek on the horizon, intended to drive demand for AI, the enthusiasm has not translated into sustained positive performance.

Stocks	YTD Performance	One Year Performance
Nvidia Corporation NVDA	-9.76%	46.42%
Apple Inc. AAPL	-1.01%	37.86%
Microsoft Corp. MSFT	-5.16%	-4.32%
Amazon.com Inc. AMZN	-3.75%	19.36%
Alphabet Inc. Class C GOOG	-9.71%	28.26%
Meta Platforms Inc. META	11.51%	34.13%
Tesla Inc. TSLA	-22.74%	55.76%
Palantir Technologies Inc. PLTR	12.92%	253.18%
Oracle Corp. ORCL	0.02%	45.59%

Additionally, AI-focused exchange-traded funds (ETFs) have markedly underperformed as well in 2025.

ETF Name	YTD Performance	One Year Performance
iShares US Technology ETF IYW	-3.06%	14.53%
Fidelity MSCI Information Technology Index ETF FTEC	-3.80%	13.40%
First Trust Dow Jones Internet Index Fund FDN	1.09%	20.90%
iShares Expanded Tech Sector ETF IGM	-2.19%	16.18%
iShares Global Tech ETF IXN	-2.50%	9.97%

Market Warning: Howard Marks raised his concerns once more in a memo dated Jan. 7, outlining several cautionary signs in the market. He pointed to inflated valuations, the ongoing hype around AI, and a heavy dependence on large tech companies as reasons for concern. Marks referred to research from JP Morgan Asset Management, which indicates that high valuations often result in poor returns over the next decade. He cautioned investors to heed these warning signs, especially the current elevated valuations.

Current Market Response: Despite the concerning trends in AI and technology stocks, the broader market has seen upward movement. Both the SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust ETF (QQQ), which track major indices, experienced gains recently. The SPY gained 1.56% to $594.18, and the QQQ also rose by 1.56% to $508.10, according to available market data.

Investing, AI, Bubbles, Market, Stocks