Warren Buffett’s 1979 Warning May Be the Perfect Lesson for Today’s AI Boom, Says Howard Marks: ‘Uncertainty Actually is the Friend’
Rishabh Mishra 4 hours ago
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Howard Marks says Warren Buffett's 1979 warning on uncertainty is the perfect lesson for investors navigating today's AI boom.
Oaktree Capital Management co-founder Howard Marks used a 1979 statement by veteran investor Warren Buffett to advise clients on navigating the artificial intelligence sector in the current market.
A Lesson in Uncertainty
In a memo titled “A Layman Thinks About AI,” Marks stated that investors should not abstain from the AI industry despite its unpredictability. In his memo, Marks concluded by citing a quote from Warren Buffett published in Forbes magazine on Aug. 6, 1979.
Buffett’s quote advises investors against waiting for a “cheery consensus” because the future is never clear. Marks emphasized Buffett’s statement that “uncertainty actually is the friend of the buyer of long-term values.” Marks designated this 1979 warning as the “perfect ending for a memo on AI.”
Read Also: Howard Marks Warns AI Investing Is a $1 Trillion Gamble: 'Practically Unknowable' Profits
Assessing Unpredictability
Marks described AI as the “most consequential and least predictable development for investors in at least a generation.” He noted that investors in AI must correctly forecast technological evolution, compute demand, and financing availability.
To quantify the uncertainty, Marks asked Anthropic’s Claude to rate AI’s predictability on a scale of one to 10. The model assigned AI an overall score of three, while giving the economic outcomes investors care about, including profitability, timing and which companies capture the gains, a score of just two.
Marks concluded that determining whether the trillions of dollars invested in AI infrastructure will generate adequate returns is presently a “matter of faith.”
The Recommended Strategy
Despite the sector’s risks, Marks advised his clients that the correct response is not investment paralysis. Instead, Marks recommended that market participants approach the sector with “calibrated humility regarding strategy selection, position sizing, and risk-taking.”
He emphasized the necessity of a “willingness to act in the presence of uncertainty.” Marks warned that investors must accept they do not possess complete knowledge, stating that the AI sector is certain to produce surprises.
How Has the Stock Market and AI-linked ETFs Performed?
The S&P 500 index has advanced 11.3% year-to-date. Similarly, the Nasdaq Composite index was up 9.57%, and the Dow Jones gained 9.2% YTD.
On Wednesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 and Nasdaq-100, respectively, closed higher. SPY was up 1.32% to $759.81, while QQQ advanced 2.31% to $690.38. Meanwhile, the Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), ended 0.52% higher at $524.44.
Here’s how some AI-linked ETFs have performed.
| Stocks | YTD Performance | Six Months Performance | One-Year Performance |
| iShares Future AI & Tech ETF (NYSE:ARTY) | 39.55% | -2.01% | 37.77% |
| Roundhill Generative AI & Technology ETF (NYSE:CHAT) | 24.47% | -15% | 14.77% |
| Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ) | 16.65% | -4.68% | 14.99% |
| WisdomTree AI and Innovation Fund (BATS:WTAI) | 19.77% | -15.7% | 12.84% |
| iShares Semiconductor ETF (NASDAQ:SOXX) | 52.89% | -12.49% | 54.37% |
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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