AI boom, stock market bubble and millions of lost jobs: Howard Marks' warning

When stock indexes are hitting all-time highs thanks to AI companies, while the same technologies are simultaneously threatening millions of jobs and pushing governments into debt, it's worth listening carefully to the people who made their fortunes precisely on the ability to distinguish hype from real value.

Howard Marks, co-chairman of Oaktree Capital Management. Vernon Ewen/NurPhoto/Getty Images

Oaktree Capital co-founder, billionaire and one of the world's most respected investors Howard Marks, in a new letter to clients, described a set of threats that, in his opinion, are shaping the contours of the next major crisis: a potential stock market bubble, millions of job losses due to artificial intelligence, the explosive growth of US debt and the rise of social polarization.^{1 3 5} Marx does not fall into an apocalyptic tone, but he warns directly: investors are dealing with a rare combination of factors, where euphoria around technology overlaps with structural problems of inequality and debt, and the political space is vulnerable to “populist demagogy.”^{1 3 9} His warnings fit into a broader context: the IMF, Goldman Sachs, McKinsey and other institutions are already recording the risk of deepening inequality and redistribution of benefits from AI in favor of a narrow layer of capital owners.^{2 4 7} .

Who is Howard Marks and why do people listen to him?

Howard Marks is the co-founder and co-chairman of Oaktree Capital Management, one of the world's largest investors in "distressed" debt instruments, known for his analytical notes that have been closely read on Wall Street and central banks for decades.^{1 3} He started out as a stock analyst, but in the 1970s he shifted his focus to the debt market, and his firm earned a reputation for getting into assets when others were fleeing, from US junk bonds to the debt of countries experiencing crises.^{1 3} His previous memoranda have repeatedly preceded large-scale shifts: Marx warned about overheating markets before the 2008 crisis, and in recent years has systematically drawn attention to the concentration of risks in the high-tech stock segment.^{3 5 9} .

In a December 2025 letter, partially quoted by Business Insider and other media outlets, Marx returns to the question he had already raised in the title of a separate essay, “Is It a Bubble?” — ​​is the current AI rally in stock markets a form of bubble, similar to the dot-com of the late 1990s?^{1 3 6} He formulates his answer cautiously: “there is undoubtedly euphoria about AI; the question is whether it is irrational,” but adds that the scale of the consequences of a potential bursting of such a bubble could be “another big blow” to household welfare and the stability of the system.^{1 3 6} .

Stock market bubble: how the AI ​​rally differs from the dot-com

According to Marx, the risk lies not so much in the fact that the share prices of AI companies are rising, but in the scale of expectations that are already embedded in them.^{1 3 6} . In 2025, “big tech” will be the main driver of growth in American indices: according to various estimates, up to a third of the value of the S&P 500 is somehow connected to companies actively investing in AI — from Microsoft, Alphabet, Amazon and Meta to Nvidia and Oracle.^{7 10 12} This concentrates market risk: if the expected breakthrough in AI productivity or monetization turns out to be weaker than the promises of presentations, a correction in these securities will automatically hit millions of index investors and pension funds.^{7 10 12} .

At the same time, today's situation differs from the dot-com era in that AI leaders are already generating real cash flow: chip manufacturers and cloud platforms are selling specific services and infrastructure, not just the "click economy" of the future.^{7 10} However, Marx stresses that the presence of revenue does not negate the risk of a bubble: if the market is paying odds that assume almost continuous double-digit growth for years to come, any slowdown could turn a “success story” into a source of mass wealth destruction.^{1 3 6} .

AI as a threat to employment: "it's hard to imagine a world where everyone keeps their job"

The most disturbing part of the letter concerns the labor market: Marx directly calls the employment prospects under the conditions of widespread implementation of AI "frightening."^{1 2 3} In his opinion, artificial intelligence can radically reduce the need for human labor in entire sectors - from office functions and entry-level technical roles to some creative and analytical professions, where routine tasks can be automated faster than society can adapt.^{2 4} He particularly notes the vulnerability of lower-skilled workers and entry-level workers, for whom mass automation will mean not just competition for wages but the disappearance of jobs as such.^{1 2 4} .

Estimates from international organizations confirm the scale of the problem: according to Goldman Sachs, AI could “touch” up to 300 million full-time jobs in the world, and for a significant proportion this would mean partial or complete loss of employment, and the IMF warned in 2024 that up to 60% of jobs in developed economies would be directly or indirectly affected by AI technologies.^{2 4 7} McKinsey estimated that automation and new technologies could “close” more than half of the work hours in the US currently performed by humans if companies massively implement accessible tools.^{2 4 7} Against this background, Marx's question — "how can employment not decline?" — sounds rather rhetorical.^{1 2 3} .

The risks of universal basic income and the debt spiral

A logical political response to the mass displacement of people from the labor market is the discussion of universal basic income (UBI): regular payments to all or certain groups of citizens to compensate for the loss of earnings^{2 5 9} Marx does not deny that such mechanisms may become necessary, but he raises a key question: where will the money for such programs come from in an economy where the share of working people in the population is declining and the state's debt position is already causing concern?^{1 3 5} In his view, shifting the costs of UBI to an ever-narrower slice of those who actually work and pay taxes will create additional pressure on the US budget and could accelerate the movement towards what he describes as a “debt spiral.”^{1 3 5} .

The financial data here is also not in favor of optimists: the US national debt already exceeds 120% of GDP, and interest service is becoming one of the largest budget items against the backdrop of a period of relatively high interest rates.^{5 11} In such a configuration, large-scale permanent transfers to the population, unaccompanied by growth in productivity or the tax base, may prove to be a politically popular but financially devastating solution.^{3 5 11} Marx directly asks whether governments will be able to “finance ever-increasing deficits” in the new reality and what will happen if markets start demanding a higher risk premium or lose confidence in the solvency of the state.^{1 3 5} .

Inequality and political polarization: perfect fodder for populists

Marx's fourth set of concerns lies in the political realm: he expects increased social tension and polarization as a result of the combination of AI, inequality, and debt solutions.^{1 3 9} . In his words, “a small number of highly educated billionaires on the coasts” will be seen as having created technologies that have put millions out of work — and this promises “even greater social and political division than we have now,” opening up space for populist demagoguery.^{1 3 5} This scenario is consistent with the analysis of the IMF and a number of think tanks, which predict that the benefits of AI will mainly accrue to capital owners and highly skilled personnel, while low- and medium-skilled workers will be hit by a double blow - income stagnation and employment instability.^{2 4 7} .

The “great paradox” of the situation is already visible today: the market capitalization of the “Magnificent Seven” — Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia, Tesla — reaches a third of the S&P 500, while statistics record waves of layoffs in the technology sector, rising youth unemployment, and pressure on the middle class.^{4 7 10} Against this backdrop, politicians who promise to “stop the globalists,” “tax the robots,” or “put jobs back to people” gain a powerful emotional base—even if their prescriptions are economically dubious or downright destructive.^{4 9 12} .

Is it really a bubble: arguments for and against

In his own analytical note “Is It a Bubble?” Marx identifies several criteria characteristic of classic periods of overheating: overly optimistic expectations about the future, the belief that “this time everything will be different”, the reluctance to discuss risks, and the belief that “you can get out in time”.^{3 6 9} Many of these signs are now evident in the AI-stock segment: from unrealistic multiples of individual companies to media narratives that automatically transfer the successes of basic models to any business that adds the acronym AI to its description.^{7 10 12} At the same time, he acknowledges that the current wave of technology has real meaning — from semiconductors to cloud services, which are already generating profits and changing the cost structure of companies.^{7 10} .

Skeptical voices, including a number of analysts at Morgan Stanley, Reuters, and independent economists, emphasize that the current rally is much more “fundamentally supported” than the dot-com, but warn of concentration: when 7–10 stocks provide more than half of the index’s returns, any shock in this segment becomes systemic.^{7 10 12} . Marx essentially sums it up: it’s impossible to say for sure whether we’re inside a bubble in real time, but the combination of risks—valuation, debt, inequality, and politics—makes the situation seem more likely than optimists would like.^{1 3 6} .

What is important for Ukraine?

For Ukraine, Marx’s warnings have at least three dimensions. First, a possible reversal in global risk appetite in the event of a correction in AI stocks would directly hit capital markets, which determine both the prices of external borrowing and the willingness of private investors to enter Ukrainian assets after the war.^{3 6 11} If large funds are forced to patch holes in their portfolios due to the decline of Big Tech, investments in risky and long-term projects like the reconstruction of Ukraine may take a back seat.^{6 11 12} .

Secondly, Ukraine itself is actively integrating into the global AI economy: from startups to in-house developments in the public sector, and the issue of the impact of AI on the local labor market will become acute in the coming years.^{4 7 13} The risk is that a country with a huge reserve of educated youth may face the same paradox: a simultaneous increase in demand for a narrow group of highly qualified specialists and the displacement of broad segments of the population from traditional “white-collar” and some technical specialties.^{4 7 13} .

Third, the discussion about debts and social transfers is no less relevant for Ukraine than for the United States: a model of post-war social policy and investment in human capital will have to be built in a world where the global value of money, the structure of labor demand, and the possibilities of automation are radically changing.^{3 6 13} And here, Marx’s sober, techno-utopian view of AI as both a productivity tool and a factor of social turbulence may prove more useful than another presentation of “digital breakthroughs.”^{1 3 9} .

What should investors and society do?

Marx doesn’t usually give simple recipes, but there are a few guidelines to be read between the lines of his letter. For investors, this means reassessing risk concentration: instead of blindly following indices dominated by a few AI giants, it’s worth looking at portfolio structure, the role of debt instruments, and diversification opportunities across sectors and regions.^{1 3 6} For governments, this is a signal about the need for proactive labor market policies: investments in retraining, support for education, development of areas where AI will not replace humans in the near future, and an honest dialogue about how and at whose expense social programs will be financed in the era of automation.^{2 4 7} .

Regarding society in general, Marx's main idea is that AI changes not only wages, but also the structure of meaning: work gives people not only money, but also a sense of role, belonging, and dignity, and replacing this with regular "checks from the state" is much more difficult than it seems in theoretical UBI models.^{2 5 9} And if these questions are ignored, the real bubble may not be so much the value of AI companies’ shares as the belief that society can painlessly survive a simultaneous surge in productivity, inequality, and political tension.^{1 3 9} .

Sources

1. Business Insider: Interpreting Howard Marks' new letter on the risks of a stock bubble, job losses due to AI, and debt threats
2. Business Insider (separate article): Marx's comments on AI's threat to the meaning of work, not just wages, and the debate over universal basic income
3. Oaktree Capital: Howard Marks's "Is It a Bubble?" Memo and accompanying posts on AI, market valuations, and structural risks
4. IMF, Goldman Sachs, McKinsey: analysis on the impact of AI on the labor market, the potential coverage of hundreds of millions of jobs and the threat of growing inequality
5. Bloomberg, Yahoo Finance: Interviews and reviews with Marx's comments on "frightening" employment prospects, debt burden and political implications
6. Analytical reviews on the AI ​​rally in stock markets in 2025: assessing concentration in the "Big Seven" and the role of AI in shaping index returns
7. Research by international think tanks: forecast of the impact of AI on inequality, productivity and the distribution of capital between labor and asset owners
8. Articles from economic blogs and expert platforms about parallels between the current AI boom and previous technological revolutions
9. Reviews of the political consequences of economic polarization: the role of technological elites, populism, and public distrust in the United States and other advanced democracies
10. International economic statistics on US debt, interest rates and debt service costs in the 2020s
11. Analytics on possible scenarios for adapting the labor market to AI, including retraining, tax policy, and social protection models