The Meb Faber Show

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Aswath Damodaran on The AI Spending Spree: Bubble, Boom, or Both? | #619

Feb 27, 2026 • 58 mins

My guest today is Aswath Damodaran, a professor at NYU, where he teaches corporate finance and equity valuation. In today’s episode, Professor Damodaran explains why he trimmed two Magnificent Seven stocks. He digs into AI’s real impact on valuations and moats, why big software incumbents face an Innovator’s Dilemma, and why the biggest risk isn’t tech spending itself, but overconfidence and debt-fueled capex that could ripple beyond tech. He also weighs in on corporate Bitcoin balance sheets, sports franchises as “trophy assets” driven by billionaire demand rather than cash flows, and the rise of prediction markets.

Key Points

Investors should be cautious about overconfidence and the potential risks of high capital expenditure in the AI sector, especially when funded by debt.
The valuation of professional sports teams is driven more by their status as trophy assets for billionaires than by traditional financial metrics.
Increased skepticism and loss of trust in traditional financial institutions are driving interest in alternative investments like gold, silver, and cryptocurrencies.

Follow Aswath: Website; LinkedIn; X

Resources: To Bitcoin or not to Bitcoin? A Corporate Cash Question! Musings on Markets - Data Update 1 for 2026: The Push and Pull of Data! Musings on Markets - Data Update 2 for 2026: Equities get tested, and pass again! Musings on Markets - Data Update 3 for 2026: The Trust Deficit - Bonds, Currencies, Gold and Bitcoin! Musings on Markets - Data Update 4 for 2026: The Global Perspective! Musings on Markets - Data Update 5 for 2026: Risk and Hurdle Rates Musings on Markets - Data Update 6 for 2026: In Search of Profitability! Musings on Markets - Data Update 7 for 2026: Debt and Taxes

Bayes and Base Rates

Aswath's appearance on the podcast in November 2024 Aswath's appearance on the podcast in May 2019 The Best Investment Writing Volume 3: Aswath Damodaran – The Perils of Investing Idol Worship: The Kraft Heinz Lessons! in August 2019

Speakers

Meb Faber

Host • 23%

Aswath Damodaran

Guest • 76%

Chapters

0:00	Starts
0:34	Professor Damodaran on the Magnificent Seven
7:26	OpenAI's growth, AI's impact on valuations, and software industries
16:07	High capex investment risks
23:10	Market timing
33:43	Trust and the rise of gold and silver
45:12	Cryptocurrencies on company balance sheets
47:42	Sports franchises
52:27	Prediction markets

Transcript

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