Speaker · Updated
Howard Marks: latest market views
Oaktree Capital Management
Summary
Howard Marks is the co-founder and co-chairman of Oaktree Capital Management, a leading distressed-debt and alternative investment firm, and is widely known for his influential investor memos and the book 'The Most Important Thing'.
Chorus has 29 views from Howard Marks across 2 episodes on Howard Marks: memos and The Memo podcast since September 22, 2026. Their latest calls: bullish on NVIDIA and Taiwan Semiconductor Manufacturing Company.
Where they stand
Their latest bullish or bearish call on each company.
- NVIDIABullish ·
- Taiwan Semiconductor Manufacturing CompanyBullish ·
What they talk about most
- AI infrastructure & data centers · 3
- US Treasuries & yields · 3
- AI & jobs · 2
- AI bubble & tech valuations · 2
- AI: overall outlook · 2
- US stock market outlook · 2
- US deficit & government debt · 2
- US dollar · 2
- AI pricing & unit economics · 1
- Credit markets · 1
- Frontier AI labs & model race · 1
- IPOs, M&A & deal activity · 1
The latest views
Newest first. Every quote is checked against the episode's transcript.
If AI models become commodities, vendor profits get ground down and the gains go to users.
Marks argues that if several AI models become equally capable, their service could become a price-driven commodity. In that case profitability and return on investment would be ground down, and the economic benefits could flow more to AI users than to vendors. He points to declining prices per token and cheaper, open-source and Chinese models as pressures on vendor pricing. The argument is framed as a question and carries a hedge, so it is a tentative view.
“Will their service become an undifferentiated commodity that sells on the basis of price? If it does, will profitability and ROI be ground down, in which case the economic benefits may go more to the users of AI than to the vendors?”at 9:16
Howard Marks: memos and The Memo podcast: A Layman Thinks About AI ·
Taiwan Semiconductor Manufacturing CompanyBullish
TSMC's large profits show the value of its strong competitive position in AI chips.
Marks names TSMC alongside Nvidia as a big chip producer racking up large profits, which he cites as evidence of the value of a strong competitive position. He also notes that nearly all leading-edge chips come from TSMC, which underlines its central role in AI.
“The big chip producers, NVIDIA and TSMC, are racking up the big profits these days, demonstrating the value of a strong competitive position.”at 9:56
Howard Marks: memos and The Memo podcast: A Layman Thinks About AI ·
NVIDIABullish
Nvidia's large profits show the value of its strong competitive position in AI chips.
Marks cites Nvidia and TSMC as the big chip producers racking up large profits in the current environment. He takes this as evidence of the value of a strong competitive position in AI. He treats chip producers as among the clearer beneficiaries of AI spending, while noting that chip life and obsolescence remain open questions for the rest of the stack.
“The big chip producers, NVIDIA and TSMC, are racking up the big profits these days, demonstrating the value of a strong competitive position.”at 9:56
Howard Marks: memos and The Memo podcast: A Layman Thinks About AI ·
AI will likely replace many workers, so it is probably going to be taxed like the people it displaces.
Marks argues that one of AI's most likely effects is replacing workers. Governments will need to replace tax revenue that came from those workers, and many top earners already face combined rates of 50% or more. He asks what would stop AI from being taxed like people, and what tax bracket it would fall in. This is a tentative view framed as a question, and he notes he has heard little discussion of it.
“Given that one of AI's most likely effects will be replacing workers, and given government's need to replace the tax revenues that previously came from taxing the people AI puts out of work, what's to say AI won't be taxed like people?”at 10:12
Howard Marks: memos and The Memo podcast: A Layman Thinks About AI ·
AI infrastructure & data centers
Data center investing is not a safe bet: constraints and overbuilding risk, though supply curbs could help existing sites.
Marks argues data centers look safer than AI developers because they are bricks and mortar, but most of their cost is GPUs whose obsolescence risk falls on the operator, not the building shell. Developers face site acquisition, regulatory hurdles and local opposition, plus bottlenecks in power, cooling, construction and financing, and financing costs could surprise. He sees picks-and-shovels exposure as a way to avoid having to pick AI winners, but overbuilding could create oversupply. Moratoriums on data center construction could make existing and future sites more profitable and valuable. He concludes the winners' and losers' results may be more pronounced than usual in infrastructure.
“The key here is that data centers aren't a layup. The intelligent investor has to find opportunities that are insulated from the uncertainties just listed, and won't be subject to overbuilding and thus oversupply of compute.”at 17:47
Howard Marks: memos and The Memo podcast: A Layman Thinks About AI ·
AI capex is carrying most of US economic growth while the rest of construction declines.
Marks argues AI is a small part of the US economy but is responsible for an outsized part of economic growth. AI's contribution to GDP growth currently comes overwhelmingly through capital expenditures, mainly data center construction, which is rising rapidly while the rest of construction is in decline. He adds that AI-related workers' spending on rent, food and cars carries AI's effect beyond the sector. This concentration is why he sees the economy as dependent on a single factor.
“AI represents a small part of The US economy but is responsible for an outsized part of economic growth. AI's contribution to GDP growth currently comes overwhelmingly through capital expenditures, primarily for construction of data centers.”at 18:45
Howard Marks: memos and The Memo podcast: A Layman Thinks About AI ·
The S&P 500 is concentrated in a few AI and tech companies, leaving the market vulnerable to AI setbacks.
Marks cites JPMorgan data showing 42 AI-related companies generated about two-thirds of S&P 500 price gains since January 2024. He also notes that Magnificent Seven earnings have outgrown the rest of the index for 14 consecutive quarters, and that AI capex is carrying US GDP growth while other construction declines. He argues that because the economy and markets rely on a few undiversified factors, AI has become a 'fault line' through portfolios. Negative developments in chip life, corporate strategy or compute demand could have far-reaching consequences, so the market is more vulnerable than it would be with broad-based drivers.
“It's incontrovertible that disproportionate reliance on a single sector makes the economy and stock market more vulnerable than they would be if the factors underlying them were broad based.”at 20:59
Howard Marks: memos and The Memo podcast: A Layman Thinks About AI ·
AI infrastructure & data centers
AI needs about $1 trillion of new capital a year, with hundreds of billions likely raised as debt.
Marks cites Goldman Sachs data showing roughly $600 billion of AI-related debt issued globally so far this year, around $400 billion of it in US investment grade, which is over a fifth of IG supply. From that pace he projects AI needing an average of $1 trillion of new capital per year in the period ahead, with hundreds of billions of it continuing to be raised as debt each year. This scale is the basis for his later concerns about rates, equity capacity and credit quality.
“AI seems likely to require an average of $1,000,000,000,000 of new capital per year in the period ahead, and hundreds of billions of that are likely to continue to be raised each year through the issuance of debt.”at 22:46
Howard Marks: memos and The Memo podcast: A Layman Thinks About AI ·
Rate-insensitive hyperscaler borrowing may push up the interest rates the US government must pay.
Marks compares AI borrowing with the classic crowding-out effect, in which heavy government borrowing makes it hard for the private sector to get capital. Hyperscalers and frontier labs can't afford to slow AI investment because rates are high, so they keep borrowing at any price. He thinks this rate-insensitive demand for debt could raise the rates the government pays. He asks whether it has already contributed to the recent rise in rates, which suggests he believes it has, but he presents this as a question rather than a firm conclusion.
“At present, it feels to me that the demand for debt from rate insensitive hyperscalers willing to pay whatever it takes has the potential to elevate the interest rates the government must pay.”at 23:42
Howard Marks: memos and The Memo podcast: A Layman Thinks About AI ·
Equity markets may not supply the hundreds of billions of new AI equity needed yearly, and AI debt and equity will compete.
Marks notes that traditional US IPO proceeds were below $50 billion in eight of the last ten years, with exceptions of about $80 billion in 2020 and $140 billion in 2021. He suspects there is only so much new capital available in a given year. He also argues that AI's demand for debt and for equity, which AI requires alongside company cash flow, will ultimately compete for that same limited pool. Together these points suggest the equity market may struggle to fund AI's needs.
“I suspect there's just so much new capital available in a given year. Won't AI's appetites for both debt and equity ultimately compete against each other for it?”at 24:24
Howard Marks: memos and The Memo podcast: A Layman Thinks About AI ·
Lenders to AI face concentrated, fast-changing debt that depends on compute revenues, so they must be vigilant.
AI-related bonds are about 12% of the Bloomberg USD IG corporate index and about 6% of US high yield. Some data center debt rests on hyperscaler tenants' investment grade ratings, while other debt is collateralized by chips. Marks warns that data center leases can let tenants terminate if uptime falls short of 99.9%, and that chip collateral may not last as long as the debt. He also flags circular vendor financing and special purpose vehicles that keep debt off hyperscaler balance sheets, and asks whether hyperscaler creditworthiness and ratings may change as they add leverage. He concludes lenders face a new era and must scrutinize borrowers and deal terms closely.
“Lenders to AI face a new era, marked by debt concentrated in a single industry, rapid change in industry fundamentals, and a high degree of reliance on the level of future revenues from sales of compute.”at 27:19
Howard Marks: memos and The Memo podcast: A Layman Thinks About AI ·
AI's direction is fairly predictable, but what investors get paid for from it is much less predictable.
Marks asked Claude to rate AI predictability from 1 (unknowable) to 10 (fully predictable). It gave AI overall about a 3, split into a direction score of about 6 to 7, since the technology will keep improving and spread through the economy, and a score of about 2 for the things investors get paid for: how fast it happens, how big the profits are, and who keeps them. Marks adopts this framing and presents it as the core of his assessment, which explains why he thinks the investment outcome is unusually hard to predict even though the technology trajectory is clearer.
“AI as a whole scores about a three. ... The direction is fairly predictable, maybe a six or seven. ... The things investors get paid for are much less predictable, around a two, how fast it happens, how big the profits are, and who keeps them.”at 28:45
Howard Marks: memos and The Memo podcast: A Layman Thinks About AI ·
Frontier labs like OpenAI, Anthropic and xAI are practically unknowable, with huge capital needs and unclear moats.
Marks cites Claude's rating of frontier labs (OpenAI, Anthropic, xAI) at 2 out of 10 predictability, which he reads as practically unknowable. He calls them impressive with big leads, but notes they are close to binary bets with huge capital needs, falling prices per unit of capability, and unclear lasting moats. He points out that these labs were unknown only a few years ago, so today's leaders could be displaced, and that the most uncertain propositions seem priced at a premium in private markets. He flags that OpenAI and Anthropic have filed for IPOs and that the public pricing of their shares will be telling.
“For me, the surprise was the Frontier Labs score of two, which I take to mean 'practically unknowable'.”at 30:27
Howard Marks: memos and The Memo podcast: A Layman Thinks About AI ·
US limits on advanced chip sales push China toward cheap models that undercut US models.
Marks notes that nearly all leading-edge chips come from TSMC in Taiwan, and that the US restricts sales of the most advanced chips to China. He argues this encourages China to offer low-cost models that can undercut more powerful US models. He asks what happens to US competitiveness if this changes, whether Chinese chips could catch up, and whether China could restrict Taiwanese chip sales to the US. These geopolitical risks are a key source of unpredictability for AI investors.
“The US restricts sales to China of the most advanced chips. This encourages China to offer low cost models that can undercut sales of more powerful US models.”at 31:45
Howard Marks: memos and The Memo podcast: A Layman Thinks About AI ·
AI technology isn't an illusion, but whether AI spending and prices are justified is largely a matter of faith.
Marks defines a bubble as irrational exuberance leading to imprudent behavior, excessive investment and too-high prices, and says it must be judged on three counts: whether the technology is overhyped, whether spending is excessive with inadequate returns, and whether investors pay too much for stakes. He believes AI will be powerful and consequential, so the technology is not an illusion. But whether the trillions in capex will earn adequate returns depends on how AI will be used and who will profit, and until those are known, neither the spending nor the prices of stocks and debt can be judged. Talking to knowledgeable people, he concludes this is largely a matter of faith.
“The conclusion I draw from my conversations with people I consider knowledgeable is that, at this point, answering this question is largely a matter of faith.”at 36:36
Howard Marks: memos and The Memo podcast: A Layman Thinks About AI ·
For AI, judging intrinsic value and whether an investment is cheap is much harder because of unresolved questions.
Marks argues that his usual method of investing, which depends on price relative to intrinsic value, is much harder to apply to AI. He says a high level of uncertainty can be acceptable if the price is low enough relative to intrinsic value, but for AI, estimating intrinsic value and therefore cheapness is 'greatly complicated' by open questions. Those questions include who will profit from AI, how much power availability constrains buildout, and what residual asset value will be. Because those cannot be answered definitively, the valuation of AI investments is inherently hard to pin down.
“Note, however, that in the case of AI, thinking about intrinsic value, and thus, cheapness, is greatly complicated by the questions just raised.”at 38:53
Howard Marks: memos and The Memo podcast: A Layman Thinks About AI ·
AI will produce many surprises, but they needn't be unbearable, so investors should not ignore it.
Marks says that AI is sure to produce many surprises, and that investors must accept they do not know everything about it. He argues the key question is the probability that an AI investment will disappoint versus the probability that it won't. Uncertainty is therefore a reason for careful probability-weighing rather than avoidance, and he frames AI as 'too important' to ignore. He gives no specific numbers or forecasts for AI outcomes, so this is a general view on how to approach the sector.
“AI is sure to produce a lot of surprises, but they needn't be unbearable. The thing to ponder is, what's the probability an AI investment will disappoint, and what's the probability it won't?”at 40:05
Howard Marks: memos and The Memo podcast: A Layman Thinks About AI ·
Treasury's long-dated buybacks are a cosmetic, temporary fix that does not address the root causes of rising yields.
The Treasury doubled, then tripled, the maximum size of its long-dated buybacks to push long yields down. Marks argues that buying bonds only lifts prices while the buying continues. Once it stops, the market reverts to where fundamentals put it, so the effect is fleeting. He compares it to a column of water holding up a ball, which falls when the pumping stops. Long rates fell briefly after the announcement and then bounced back the next day. He also says the intervention ignores the causes of the rise (sticky inflation, deficits, AI capital demand). Officials' announcements are largely psychological and their influence wanes without attention to root causes. Market reaction to the expanded buyback was underwhelming, with yields rising. He calls it like a doctor applying an ice pack to a fever: it may lower the temperature, but the patient won't get well until the underlying cause is treated.
“I view this action as an attempt to improve the interest rate picture cosmetically.”at 3:33
Howard Marks: memos and The Memo podcast: Shall We Repeal the Laws of Economics – Part III ·
US inflation is stubbornly above target, with PCE at 3.7% versus a 2% goal, keeping pressure on yields.
Marks identifies inflation as one of the key causes of the rise in long rates. PCE inflation was 3.7% in July, versus the Fed's 2% target. He says this is the primary reason the Fed raised its benchmark rate the previous week. Elevated oil prices from the war with Iran threatened to keep inflation high. Because inflation erodes the purchasing power of the currency, investors buying long-term bonds demand yields that include an inflation protection component. The result is higher long-term yields, which is why the Treasury's intervention does not address the underlying issue.
“inflation is stubbornly higher than is desirable. For example, PCE inflation was 3.7% in July versus the Fed's long term target of 2%.”at 5:41
Howard Marks: memos and The Memo podcast: Shall We Repeal the Laws of Economics – Part III ·
US deficits are unsustainable and inflationary at near-full employment, with no serious budget discipline in sight.
The deficit is about 6% of GDP, which Marks calls extraordinarily high for an economy in prosperity with unemployment at 4%. Net interest outlays are projected above $1 trillion this year, more than the defense budget, and they will rise quickly if debt grows faster than GDP. Deficit spending during expansions adds to liquidity and aggregate demand, which feeds inflation, and the government is running large deficits in good times with no talk of balanced budgets. Marks ties this to Keynes, who advocated deficits in slowdowns and repayment during growth. He argues the US is doing the reverse. Buffett's view is also cited, that the deficit is unsustainable over a long period and the cost is already being imposed.
“Today's deficit is in the vicinity of 6% of GDP, an extraordinarily high level for an economy enjoying prosperity with unemployment of only 4%.”at 7:38
Howard Marks: memos and The Memo podcast: Shall We Repeal the Laws of Economics – Part III ·
AI infrastructure & data centers
The multi-trillion-dollar AI build-out adds to capital demand and puts upward pressure on interest rates.
Marks argues that US growth plus the government's deficit needs, combined with the AI build-out, create strong demand for debt and equity capital. Simple supply and demand says increased demand for capital raises its price, which is the interest rate. McKinsey estimates over $5 trillion will be spent worldwide on AI-related data centers through 2030. A fair bit will be borrowed, and equity raised for it will draw on the same pool of available capital, which affects what bonds must pay to attract buyers. That adds to the forces keeping long-term rates high.
“and to that is added the multi trillion dollar investment in AI. The result of this combination is strong demand for debt and equity capital.”at 9:07
Howard Marks: memos and The Memo podcast: Shall We Repeal the Laws of Economics – Part III ·
Long-term Treasury yields reflect fundamentals and are unlikely to fall anytime soon.
Marks rejects Treasury Secretary Bessent's claim that yields are detached from fundamentals (blaming the Iran war and thin liquidity in the 30-year market). He argues the fundamentals are what drive them. Those include inflation running above target (PCE 3.7% in July), with investors demanding an inflation premium on long bonds. They also include the need for fresh issuance to fund deficits of about $2 trillion in net new supply, and the capital demand from the multi-trillion-dollar AI build-out, which competes for the same savings. Together these put upward pressure on yields and argue against a meaningful decline in rates anytime soon.
“I think US long term bond yields are reflecting the fundamentals as just described.”at 10:43
Howard Marks: memos and The Memo podcast: Shall We Repeal the Laws of Economics – Part III ·
A serious probability of US default on its debt is unlikely; the US can keep financing deficits in dollars.
Marks says it is hard to identify what would stop the US from financing deficits by adding to debt. He does not see a serious probability of the US failing to repay as scheduled, because its debt is denominated in a currency it issues. The dollar is the world's main reserve currency, with 89% of FX transactions in 2025 and 57% of allocated official reserves in Q1 2026. He contrasts this with Weimar Germany, whose money creation to finance deficits led to a currency collapse. He concedes that the 'can't go on forever' logic still holds, so the problem is the cost and the eventual need to fix it, not a near-term default.
“I don't think there's a serious probability The US will fail to repay debt as scheduled.”at 12:57
Howard Marks: memos and The Memo podcast: Shall We Repeal the Laws of Economics – Part III ·
The dollar will remain the world's main reserve currency, since no alternative is ready to replace it.
Marks argues the world needs safe, liquid reserve currencies, and for the dollar to lose its primary role another currency or group would need to take a larger share. The euro remains second but has not closed the gap with the dollar 15 years after it was seen as a possible challenger. The renminbi holds only about 2% of allocated official reserves, and capital controls and geopolitical tensions make a rapid rise unlikely. Talk of a China-Russia-Iran alternative is noted but treated as speculative. Gold has reportedly surpassed the dollar as the leading central bank reserve asset, but it is not used in transactions. Crypto plays a negligible reserve role. Marks concludes the world is probably stuck with the dollar for now, so the US can keep servicing its debt in nominal dollars.
“For the most part, the world is probably stuck with the dollar for now.”at 15:15
Howard Marks: memos and The Memo podcast: Shall We Repeal the Laws of Economics – Part III ·
Yield suppression and fiscal excess risk dollar debasement, though past dollar debasement fears did not materialise.
Marks sees a real risk that the US pays its debts with dollars of lower purchasing power, the 'debasement trade'. The FT argued that the Treasury's bond-yield suppression signals a willingness to let the currency fall to cap borrowing costs. Marks agrees such moves can be self-defeating. Investors worry about the purchasing power of the dollars they will be repaid in, so they demand higher rates on new dollar debt. He also notes that, after the 2008 Fed balance-sheet expansion, many feared debasement and inflation, but the dollar was not durably debased and sustained high inflation did not follow. So the risk is credible but not inevitable. He also suggests that if the US's habits catch up with it, the likely outcome is a lower opinion of the dollar.
“Such actions can be self defeating because they make people worry about the purchasing power of the dollars with which they'll be repaid, which makes them demand higher interest rates on new dollar debt.”at 16:34
Howard Marks: memos and The Memo podcast: Shall We Repeal the Laws of Economics – Part III ·
The US must raise revenue via higher top tax rates and fewer preferences, and hold spending growth below GDP.
Marks prescribes a multi-part fix for the deficit. First, raise revenue as a share of GDP through higher income tax rates, especially at the top, since the top federal marginal rate is low relative to much of the postwar period, and by eliminating tax preferences. Second, hold spending growth below GDP growth. Third, boost productivity and growth. He says a country that won't cut spending has to look at revenue, and he doubts there is another solution. He admits few people will like these measures. The argument rests on the arithmetic of deficits and debt-to-GDP rather than a near-term forecast.
“Increase revenues as a percentage of GDP through higher income tax rates, especially at the upper end, where the top federal marginal rate is quite low relative to much of the postwar period”at 19:55
Howard Marks: memos and The Memo podcast: Shall We Repeal the Laws of Economics – Part III ·
AI is more than anything else a productivity tool, and faster productivity growth would help shrink deficits relative to GDP.
Marks argues that faster GDP growth would both raise tax revenue and cut spending relative to GDP, which is the best way to reduce the deficit. The strongest route to that is productivity gains. He names increased use of AI as one driver, since AI is more than anything else a productivity tool. This is part of a broader argument, alongside solid economic growth and reduced regulation. The point is brief and not supported by quantified evidence, so it is a hedged, qualitative view.
“The best way to accomplish this would be through increased productivity, ... increasing use of AI, which more than anything else is a productivity tool”at 20:32
Howard Marks: memos and The Memo podcast: Shall We Repeal the Laws of Economics – Part III ·
The US equity problem is fiscal and dollar risk, not US companies, so selling US stocks is not the answer.
Asked whether to sell US stocks because of deficits, Marks says no. The problem is one of US fiscal management and, potentially, the dollar, not of US companies or the US stock market. Moving out of US stocks into bank deposits, money market funds or bonds would not escape the risk, because those are dollar-denominated. If US bad habits catch up with it and investors lose faith in Treasuries, the likely channel is a lower opinion of the dollar. Those who want to hedge would have to move into non-dollar assets, which carry their own risks. He does not oppose diversification for investors with non-dollar needs. He opposes a large-scale shift out of dollar assets, and says selling dollar assets may not be the answer.
“The problem we face isn't a problem with The US stock market or with US companies. It's a problem with US fiscal management and ultimately a potential problem with the US dollar.”at 21:56
Howard Marks: memos and The Memo podcast: Shall We Repeal the Laws of Economics – Part III ·
Non-US developed and emerging companies have weaker growth, less scale and tougher regulation than leading US firms.
Marks considers whether investors should diversify away from US dollar assets and concludes that moving into non-US companies brings other risks. Many developed-market companies have poorer growth prospects than leading US firms, less scale and fewer economies of scale, and operate in more highly regulated, less business-friendly jurisdictions. Emerging-market firms often look like they have good growth potential, but realising it is much more uncertain. He cites the US's advantages as the reason most institutions have been heavily allocated there: free markets, a pro-business climate, innovation, rule of law, moderate regulation, higher education and deep capital markets, which he says no other country matches. So he sees limited case for a large non-US shift.
“Many companies elsewhere in the developed world have poorer growth prospects than leading US companies, and less scale,”at 22:58
Howard Marks: memos and The Memo podcast: Shall We Repeal the Laws of Economics – Part III ·
Shows
- Howard Marks: memos and The Memo podcast · 2 episodes
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