Howard Marks says AI can't match the edge of great investors

• Investor Howard Marks argues AI lacks the intuition and judgment of top human investors in decision-making.
• Artificial intelligence processes data better, but human insight still outshines it in unique situations.
• Marks foresees AI raising the bar for investors, but said some humans will surpass its abilities.

Artificial intelligence may outperform most investors at sifting through data, but legendary investor Howard Marks says the best investors still have qualities it can't fully replicate.

"Great investors are much more than fast, unemotional processors of data," Marks, the co-chairman of Oaktree Capital Management, wrote in a memo published Thursday. His firm manages $223 billion.

This includes dealing with genuinely new situations and the ability to make "subjective decisions regarding qualitative factors and exercise taste and discernment," he wrote.

While AI may be able to generate hypotheses from historical patterns, Marks questioned whether its speculation about new things would be "consistently superior to that of all humans."

"Because a lot of the investing process comes down to speculation, and because of AI's less-than-total reliability, I think it's unlikely that AI will be infallible as an investor," Marks wrote.

He sees one more crucial difference.

"AI doesn't have skin in the game," Marks wrote. "It doesn't feel the weight of concentrated positions or the fear of capital loss."

Top investors have an instinctive feel for risk, which plays a major role in their success, he added.

If widely available information can't deliver an edge, Marks wrote, investment superiority has to be found in judgment and qualitative assessment — including "divining companies' futures."

"By definition, few people are highly superior at performing these non-quantitative tasks — put simply, few possess exceptional insight," he wrote.

That leaves room, in his view, for a subset of investors to stand apart.

"I believe there will continue to be human investors who are superior to AI, since I don't think AI will be able to do an unbeatable job of these things," Marks wrote.

For many investors, however, the bar is rising.

Marks argues that the advantage many active managers once sought in timely, readily available data is disappearing.

The competitive pressure in investing is part of a broader shift he sees unfolding.

In December, he called the technology's employment outlook "terrifying."

"I am enormously concerned about what will happen to the people whose jobs AI renders unnecessary, or who can't find jobs because of it," Marks wrote at the time.