Why Big Tech Is Racing Into AI CapEx

Aswath attributes heavy AI spending to overconfidence and winner-take markets, warning many will overinvest.

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Transcript

Episode notes

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.

(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

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