Aswath Damodaran

Professor of Finance at NYU Stern School of Business and expert on corporate finance and valuation.

Claims

As speaker

Mentioned in

Key positions and views

AI stocks are collectively overvalued, as the half-trillion-dollar investment in infrastructure is not yet supported by a viable, revenue-generating market for AI products and services.

The Indian stock market is dangerously overheated due to a confluence of institutional FOMO and domestic capital being trapped by regulations, creating valuations untethered from fundamentals.

Traditional portfolio diversification is no longer effective because of heightened correlations across all asset classes, necessitating a consideration of non-financial assets like gold for capital preservation.

Current market downturns are not irrational panic but a logical 'markdown of equities' as investors price in new, long-term structural risks from deglobalization and protectionist trade policies.

The business-to-business (B2B) market holds more immediate potential for AI monetization than the consumer market, where users have shown an unwillingness to pay for current AI capabilities.

Podcast consensus on Damodaran

Points of consensus

▶Across multiple podcast appearances, Damodaran consistently argues that the Indian stock market is overvalued, citing factors like institutional FOMO, high P/E ratios, and trapped domestic capital.

▶He repeatedly emphasizes the massive disconnect in the AI sector between the half-a-trillion-dollar investment in infrastructure and the current lack of profitable AI products and services, stating a $4 trillion market is needed to justify the spend.

▶Damodaran consistently views recent geopolitical shifts, such as US tariff policies and the breakdown of the post-WWII global order, as fundamental, long-term structural changes that justify significant market repricing.

▶He expresses a bearish outlook on current market conditions, highlighting the collective overvaluation of AI stocks, the ineffectiveness of traditional diversification, and the potential for a significant market correction.May 2026

Points of debate

▶Damodaran expresses deep skepticism about the valuations of companies like NVIDIA and Tesla, calling them the most overvalued, yet identifies Alphabet and Amazon as the least overvalued within the Magnificent Seven, suggesting a nuanced rather than monolithic view on big tech.May 2026

▶While he speculates that cross-investing among major AI companies could be a 'Ponzi scheme,' he also acknowledges the real economic growth driven by their capital expenditures, which he claims has single-handedly prevented a US recession.

▶He advises for the first time to consider non-financial assets like gold for protection due to high market correlations, but simultaneously expresses uncertainty about the long-term viability of other alternatives like Bitcoin in a market shakeout.May 2026

▶Damodaran asserts that the consumer AI market will not be lucrative due to unwillingness to pay, while also identifying the B2B AI market as holding significant potential, pointing to Palantir as a company close to succeeding, creating a contrast in his outlook for AI monetization.

Key themes

▶The AI Valuation Disconnect

Damodaran argues there is a massive gap between the capital expenditure on AI infrastructure (chips, data centers) and the actual monetization of AI products. He states that while this spending has propped up the real economy, the $4 trillion in new revenue or cost savings required to justify it has not yet materialized, making the sector collectively overvalued.

Investors should be wary of valuing AI companies based on infrastructure spending alone and must critically assess the path to profitable, scalable product and service revenue, which Damodaran believes is still 'wide open'.

▶Structural Overvaluation in the Indian Market

He characterizes the Indian stock market as having the highest P/E ratio globally at the start of 2024. This overvaluation is driven by a unique combination of institutional 'Fear Of Missing Out' (FOMO) and a large pool of domestic capital that has limited options for overseas investment due to regulations.

The Indian market's valuation is not purely based on fundamentals but is heavily influenced by technical and regulatory factors, suggesting a higher risk of correction if these capital flows or sentiment shifts.

▶Geopolitics as a Primary Market Driver

Damodaran views the breakdown of the post-2008 global economic order and rising protectionism (e.g., US tariffs) as fundamental, long-term structural changes, not temporary shocks. He believes these shifts justify the market's strong negative reactions and will lead to a smaller global economic pie.

For analysts, this means that traditional economic models may be insufficient, and a deep understanding of geopolitical risk is now essential for accurately pricing long-term equity risk.

▶The Failure of Diversification and the Search for Safe Havens

He observes that correlations across asset classes, sectors, and geographies have risen to the point where traditional diversification no longer offers reliable protection. This breakdown has led him, for the first time, to advise investors to consider holding non-financial assets like cash or collectibles (favoring gold over Bitcoin) to hedge against systemic market risk.

This signals a potential paradigm shift in portfolio construction, where non-correlated, non-financial assets may play a more significant role for risk-averse investors than in previous decades.

Source episodes

Sentiment over time

May 2026

6 bullish, 8 bearish, 5 neutral(19 claims)

Professor Aswath Damodaran has valued SpaceX at approximately $1.2 trillion.

Jun 2026

1 neutral(1 claim)

Aswath Damodaran has valued SpaceX in a range of $1.25 trillion to $1.35 trillio...

Changes over time

Post-2008

Identifies this period as the beginning of stress on the post-Second World War global economic order, which is now leading to 'actual breaks in the model'.

2019

Cites the Chinese government's crackdown on Tencent and Alibaba as a key example of how a government can turn from an ally to an adversary for its tech sector 'overnight'.

Beginning of 2024

Notes that India's stock market began the year with the highest price-to-earnings (P/E) ratio of any major global market.

Current (2024)

Argues that capital expenditure on AI data centers has been the primary driver of real economic growth, preventing a US recession this year.

Current (2024)

States that for the first time in his career, he is advising investors to consider non-financial assets due to the breakdown of traditional diversification.

Suggested prompts

How does Damodaran reconcile his view that AI CapEx has prevented a US recession with his belief that AI stocks are in a collective bubble? &nearr;What specific regulatory and behavioral factors does Damodaran identify as the primary drivers of the Indian stock market's overvaluation compared to global peers? &nearr;According to Damodaran, how have rising geopolitical tensions and US tariff policies permanently altered the risk premium for equities? &nearr;Why does Damodaran believe traditional diversification has failed, and what are the specific attributes of gold that make it a preferable 'collectible' asset over Bitcoin in the current environment? &nearr;

Key concepts

AI Valuation 2 ep Indian Stock Market 1 ep Geopolitics & Trade 2 ep Market Correction & Risk 2 ep Magnificent Seven Analysis 1 ep Portfolio Strategy & Diversification 1 ep Corporate Valuation (Specific Companies) 2 ep US Economy 2 ep

Notable quotes

“And that's why I agree with Michael Burry that AI stocks are collectively overvalued, whether you call it a bubble or not.”

Aswath Damodaran · Aswath Damodaran Says "There’s No Place to Hide in Stocks" | Prof G Markets

“the correlations across asset classes, across sectors, across geographies has risen to the point where, Now, that classic rule of if you spread your money across multiple geographies, multiple sectors, you're going to be more protected. That advice is not holding up anymore”

Aswath Damodaran · Aswath Damodaran Says "There’s No Place to Hide in Stocks" | Prof G Markets

“Right now, I can't think of a single company making money on AI products and services. Globally.”

Aswath Damodaran · Keeping My Eyes Open For These Stocks…: Aswath Damodaran On Indian Markets, Valuations & Tariffs

“taking it out will effectively mean that we've actually been in a recession, that without it, we would have been in a recession.”

Aswath Damodaran · Aswath Damodaran Says "There’s No Place to Hide in Stocks" | Prof G Markets

Report last updated: Apr 21, 2026

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