Billionaire investor Howard Marks lays out why valuing AI companies like Anthropic is so tricky

Howard Marks, co-founder and co-chairman of Oaktree Capital Management, discussed the challenges of valuing AI companies, particularly Anthropic. Marks explained that predicting a company's future earnings and performance over a five-year period is difficult, especially in the rapidly evolving field of artificial intelligence. He highlighted the recent setbacks in the AI boom, such as investors selling off Alphabet and Amazon shares due to concerns over AI spending, which somewhat burst the bubble of infallibility surrounding AI investments.

Despite these challenges, Marks emphasized that investing in AI companies remains appealing for many, as they are constantly seeking to reinvent their offerings and create new products that could significantly increase economic value. However, Marks cautioned against overreacting to short-term market fluctuations and instead advised investors to focus on building a long-term portfolio of investments that are expected to perform well over time.

He also noted that the tech-heavy Nasdaq 100, while down by around 5% over the past two days, is still up by about 13% this year and has risen by nearly 160% since the end of 2022.