(Bloomberg) — Artificial intelligence is creating a “scary” outlook for jobs, and a supposed productivity boom doesn’t take into account how many people will be able to buy the additional goods produced, Howard Marks, co-founder of Oaktree Capital Management LP, warned.
“I'm concerned that a few well-educated billionaires living on the coasts will be seen as having developed a technology that will put millions out of work,” Marks said in a blog post Tuesday. “This is expected to lead to even more social and political division than currently exists, making the world ripe for populist agitation.”
AI is a “winner-take-all arms race,” Marks said, and companies like Microsoft, Alphabet Inc., Amazon.com Inc., Metaplatforms Inc. and Oracle Inc. are “natural to think that one of the reasons they're spending so much money is to make it harder for smaller companies to catch up.”
Wall Street is preparing to loan billions of dollars to fund the rollout of AI investments, and it could take years to reward backers. More than $161 billion in data center-related credit transactions have been entered into in the U.S. so far this year, according to data compiled by Bloomberg News. As a result, lenders have sought to protect themselves from a bubble that could emerge if technology ultimately becomes outclassed.
Marks said investors are acting “speculatively” even though the growth in demand for AI technology is “completely unpredictable,” noting that Meta and Alphabet's 30-year bonds to finance AI investments pay out about 100 basis points more than U.S. Treasuries of the same maturity.
“Is it wise to accept 30 years of technical uncertainty in order to invest in bonds that are little more than risk-free debt?” he asked. “And can debt-financed investments in chips and data centers sustain productivity levels long enough to pay off 30 years of debt?”
Marks said it was very difficult to tell at this stage whether the current enthusiasm for the technology was excessive, and it would take years to know whether it was irrational. On the positive side, AI could replace the millions of baby boomers who will retire by 2035.
Still, “the AI revolution is different from previous technological revolutions in both wonderful and alarming ways,” Marks said. “It feels like the genie has been let out of the bottle and is never coming back.”
–With assistance from Michael Gambale.
(Corrects reference to company in relation to high debt in third paragraph)
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