Legendary investor Howard Marks has issued a stark warning about the current AI frenzy, cautioning that excessive hype is driving investors toward high-risk "moonshot" bets on unproven startups. Speaking on the "We Study Billionaires" podcast, Marks, co-founder of Oaktree Capital Management, expressed concern that many investors are chasing speculative opportunities with little to no revenue or profit, lured by the possibility of massive returns. "Do you want to invest in a novel, entrepreneurial startup with no revenues and no profits today, but which could be a game-changer if it works?" he asked. "Or do you want to back a proven, successful tech company where AI is just an incremental boost, not a make-or-break factor?" He argued that too many are opting for the former, driven by a lottery-ticket mentality—betting on long shots with outsized payoffs, despite the high odds of failure. Marks has been sounding this alarm for months. In a 2023 conversation with financial historian Edward Chancellor, he stated bluntly that while AI will undoubtedly transform the world, most companies currently being funded for AI purposes "will end up worthless." He sees a familiar pattern: a revolutionary technology emerges, expectations soar, and investors assume early entrants will inevitably dominate. He pointed to historical bubbles—such as the dot-com boom of 1999, the subprime mortgage crisis of 2006, the 1720 South Sea Bubble, and the 1636 Tulip Craze—as examples of how unbridled imagination can fuel irrational exuberance. "Most bubbles are built around something new," he said, noting that when innovation meets unchecked optimism, the result is often a market disconnect from reality. In practice, he stressed, most early-stage companies fail to transition from promise to profitability. On AI, he believes investors are making binary bets on companies with no real business foundation, leaving them vulnerable to collapse. Instead, Marks favors established tech giants—companies already generating strong profits and with the scale, resources, and infrastructure to integrate AI as a strategic advantage, not a survival mechanism. He believes these firms are better positioned to benefit from AI, even if the technology’s impact unfolds more gradually than expected. But he also warned that widespread technological change doesn’t guarantee investment success. "Changing the world and making money for investors are not the same thing," he said, echoing Warren Buffett’s 2000 critique of the internet stock mania, when Buffett cautioned that soaring valuations were detached from actual earnings. Marks believes investors are repeating that mistake with AI—overvaluing potential while ignoring fundamentals. For him, the smart play isn’t chasing the next unicorn, but investing in proven businesses that can leverage AI as a tool, not a lifeline.