(Bloomberg) — Artificial intelligence has created “terrifying” job prospects, warned Howard Marks, co-founder of Oaktree Capital Management LP, and a supposed productivity boom doesn’t take into account how many people will be able to afford the additional goods produced.
“I fear that a small number of highly educated multi-billionaires living on the coasts will be seen as having created technology that puts millions of people out of work,” Marks wrote on his blog Tuesday. “This promises even more social and political division than we currently experience, making the world ripe for populist demagoguery. »
Some companies are having to take on debt “aggressively” because AI is a “winner-takes-all arms race” and for companies like Microsoft Corp., Alphabet Inc., Amazon.com Inc., Meta Platforms Inc. and Oracle Corp. “It’s reasonable to think that one of the reasons they’re spending huge amounts of money is to make it difficult for small businesses to do business,” Marks said.
Wall Street is preparing to lend huge sums of money to fund the rollout of AI investments, which could take years to reward its backers. More than $161 billion in U.S. data center-related credit deals have been closed this year so far, according to data compiled by Bloomberg News. As a result, lenders have sought to protect themselves from any bubbles that might emerge if the technology ultimately proves disappointing.
Investors are behaving “speculatively” even though the growth in demand for AI technology is “completely unpredictable,” Marks said, noting that Meta and Alphabet’s 30-year bonds intended to finance their AI investments pay about 100 basis points more than Treasuries of the same maturity.
“Is it prudent to accept 30 years of technological uncertainty to make a fixed-income investment that yields little more than risk-free debt? » he questioned. “And will the debt-financed investments – in chips and data centers – maintain their productivity levels long enough for those 30-year bonds to be repaid?
It’s too difficult at this point to say whether the current enthusiasm for this technology is excessive and it will take years to know whether or not it was irrational, Marks said. On the plus side, AI could offset the millions of baby boomers who will retire until 2035.
Still, “the AI revolution is different from the technological revolutions that preceded it in ways that are both wonderful and disturbing,” Marks said. “I feel like a genie is out of a bottle and he’s not going back.”
–With help from Michael Gambale.
(Corrects reference in third paragraph to companies versus aggressive amount of debt)
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