We'll never let a good Howard Marks memo pass us by...
A little over a year ago, the famed co-founder of Oaktree Capital Management published a letter saying he didn't think we were in an AI bubble... yet.
He doubled down last August – noting that, while prices for some of these stocks are high, they deserve those rich valuations.
As AI disrupts the software industry, Marks is back yet again. This time, though, he's not just discussing how to invest in the age of AI. He's interested in how folks can use AI in investing.
That's why Marks' latest thoughts on artificial intelligence land a little differently. He isn't trying to guess which model will win or whether today's spending is rational.
He's looking at what happens to the craft of investing... when the smartest tool in the room is a machine that can read faster than you can think.
Marks starts by acknowledging a blunt reality...
AI can absorb more information than any investor.
A large language model can gather data faster... remember it better... and analyze patterns in that data with ruthless speed.
And it can do so without getting tired or emotional.
"Having the data" has been a pretend edge for a long time. Data didn't used to be available online as soon as it was announced. Back then, information was a competitive advantage.
But in the digital world, everyone gets the same headlines and data at the same time.
AI levels the playing field. It doesn't just give everyone the same information... It can process that data better than most people can.
Marks isn't saying human investors will become obsolete. He's saying that a big chunk of what used to pass for "skill" has been commoditized.
Soon, everyone will be able to replicate the work of an investment research associate in seconds.
Investors will need to find an edge elsewhere...
Marks narrows the human edge to three roles that still matter. Each lives outside of clean "pattern matching"...
The first is judging the "import and implications" of new information.
AI models are trained on historical data. They can tell you what happened... what usually happens next... and which past situations look similar.
But it's tricky to decide what matters when the situation is genuinely new... or when the market is reacting to the wrong detail.
Finding the numbers isn't much of an edge anymore. The advantage lies in understanding what those numbers mean about the future.
Second, AI still struggles with assessing qualitative factors. An AI model can tell you whether or not it "thinks" a management team is paid to do the right things... and it can wax poetic about a company's latest innovations. That doesn't mean it should.
AI is better than humans at gathering facts. It's not better at forming opinions based on those facts. It's almost impossible to remove bias from these opinion-based prompts.
Large language models generally try to give you an answer you will like... not the most accurate response.
Finally, great investors are still better at foreseeing a company's future.
Once again, this is non-quantitative. It requires a bit of "futurism" that a model trained on the past can't replicate right now.
Marks sneaks in a subtle warning here. Investing isn't built entirely on facts. It also runs on informed extrapolation... and at times, opinion.
That last piece is where AI can become dangerous. It can sound confident while inheriting the biases of its training data and the framing of your prompt.
Treat AI like an investment turbocharger...
New tech will make it easier to get up to speed. That's a gift – as long as you don't confuse speed with insight.
Use AI to gather context. Let it point out patterns you might have missed. Ask it to summarize the boring parts so you can focus on the pieces that matter for the future.
Then, remember Marks' advice. Decide what matters for yourself. Use that information to choose which management teams to trust. Predict what the future might look like... and which risks the market is ignoring.
Everyone has access to the same machine intelligence, more or less. The edge comes down to who knows when to outsource work to a model... and when to keep hold of the reins.
Regards,
Joel Litman
March 9, 2026
P.S. AI isn't the only way for investors – and businesses – to get an edge.
Some companies have success built into their DNA. We've analyzed more than 3,000 stocks and a staggering 40,169 data points... and found the No. 1 stock folks should be buying today.
It all comes down to one strategy that works in all markets – up, down, or sideways. This approach even helped investing legend Warren Buffett get ahead. Full story here.
