The Meb Faber Show - Better Investing Aswath Damodaran on the AI Spending Spree: Bubble, Boom, or Both? | #619
46 snips
Feb 27, 2026 
Aswath Damodaran, NYU finance professor and valuation expert, offers a clear-eyed take on AI’s effect on company moats and why he trimmed two big tech names. He questions runaway valuations, warns about debt-fueled capex, and probes corporate crypto, trophy sports franchises, and the promise and pitfalls of prediction markets.
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Require A Clear Revenue Story
- Demand a clear business model before investing in high-growth startups masquerading as public-like giants.
- Damodaran criticizes OpenAI for lacking a concrete revenue story beyond subscriptions, making valuation bets speculative.
AI Threatens Software Switching Costs
- AI commoditizes mechanical tasks, eroding software firms' traditional switching-cost moats built on data and integrations.
- Firms like Salesforce or Oracle face an innovator's dilemma: high margins today but pressure to lower-priced AI alternatives.
Big Tech Overinvests In AI Architecture
- Big tech’s collective AI CapEx looks excessive because multiple incumbents each expect to be the winner in a likely winner-take market.
- Damodaran calls this the big market delusion and warns of writedowns for the losers.