Famed investor says no one can really value AI companies yet

Howard Marks, a billionaire investor, says it is close to impossible to put a fair price on many AI companies right now. Speaking on Bloomberg's "The China Show" on Monday, he used Anthropic, the company behind the Claude chatbot, as his example. Anthropic recently filed to go public, in what could be one of the biggest IPOs in history.

Why AI is hard to price

Marks is a value investor. That means he tries to estimate what a company will earn five years from now, then checks whether today's stock price looks like a bargain. "I don't think we can do that with much of AI," he said. An IPO is simply when a company first sells shares to the public.

"Can we really fool ourselves into thinking we know what it will do five years from now?" he asked. Even so, he added, "that doesn't mean we don't want to be in it." He said that in six decades of investing, nothing has matched AI for how hard it is to understand, how new it is, how fast it moves, and how unpredictable it is.

The recent wobble

Stocks have had a rough patch. Last week, investors dumped shares of Alphabet and Amazon over worries about how much they are spending on AI. Marks said such stumbles have "somewhat burst the bubble of infallibility." He called it "very healthy" that investors are becoming more thoughtful and skeptical.

• The Nasdaq 100, an index of large, tech-heavy stocks, fell nearly 5% on Thursday and Friday.
• That was a drop of roughly 1,400 points.
• It is still up about 13% this year.
• It has risen around 160% since the end of 2022, to just below 28,400 points.

Other voices urge caution

Marks is not alone. Warren Buffett said in a July interview, "It's tough to find values when everybody is preferring gambling." He also noted that big companies such as Meta and Microsoft are spending hundreds of billions of dollars on chips and data centers, which he called "real money."

Michael Burry, known from "The Big Short," has repeatedly warned that AI is a bubble that will burst. He points to heavy overspending, aggressive accounting, hidden debts and circular deals as red flags.

What to do

Marks' advice is simple. Instead of worrying about how a stock does on a single day, he said, build a portfolio of things that will work in the long run and stay with it. His reasoning: "There is no reward in the investment business for hyperactivity." For anyone with tech stocks in a retirement plan, that points to expecting bumpy stretches and not reacting to every one-day drop.