Episode summary
3 AI Stock Winners & 3 Write-Offs - Prof. Damodaran
The Meb Faber Show
· · 58 min · Hosts: Meb Faber · Guests: Aswath Damodaran
Summary
Aswath Damodaran said he has sold Tesla and fully unwound Nvidia, not because he thinks they are cheap, but because Tesla became a political stock and Nvidia has already captured much of the current AI wave. He argued that the market keeps extrapolating from recent winners too far, even as some trillion-dollar valuations already imply demanding growth assumptions.
He was skeptical of OpenAI’s revenue forecasts, but his bigger concern was the lack of a clear business model. He said AI is a genuine business process change that will pressure software incumbents, especially those built on sticky data, high margins, and switching costs. In his view, many established software firms face an innovator’s dilemma because they know AI can do part of their jobs, but they hesitate to cannibalize their own products.
Damodaran also warned that the real risk in the AI boom is not capex itself but debt-financed capex, especially if private credit is funding the buildout. He sees rising mistrust in institutions feeding gold, silver, and crypto demand, and he treated sports franchises as trophy assets rather than cash-flow businesses. On prediction markets, he said they can improve forecasts but also create manipulation and feedback loops if regulation is weak.
Key takeaways
- Damodaran said he sold Tesla because it became a political investment, not because it was simply overvalued.
- He fully unwound Nvidia in 2025, arguing the stock has already ridden the core AI architecture wave.
- He thinks AI will disrupt software by attacking the high switching costs and margins that made incumbents powerful.
- He warned that debt-funded AI capex, especially through private credit, could create losses that spill beyond tech.
- He described sports teams as trophy assets whose prices are driven by billionaire demand, not earnings or cash flow.
- He said prediction markets may forecast better than experts, but thin markets can also be manipulated.
Notable quotes
“I shed my Tesla fair fairly early in the year and I did it not because I thought they were massively overvalued”
“my belief is that it's it the bulk of the the AI architecture wave Nvidia's already ridden and now we're making a bet”
“I don't want my money in a company where the CEO is unwilling or unable or doesn't even know what the story is”
“what AI is doing actually is taking much of what used to take them people and resources to do and doing it almost effortlessly”
How the episode opens
Welcome to the Met Favor Show, where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.
Met Faber is the co-founder and chief investment officer at Camry Investment Management. Due to industry regulations, he will not discuss any of Camry's funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Camrian Investment Management or its affiliates. For more information, visit cambrianvestments.com.
Welcome back everybody. The last time this guest was on the show, he set the record of 600 episodes for the most downloaded episode ever. Today we have my favorite professor, Oswath Deodoran, professor at NYU where he teaches corporate finance, equity valuation. Professor, welcome back to the show.
Thank you for having me.
Well, um, last time you were here, which is a little over a year ago, so end of 24, I think we were talking a little bit about the rage, all the rage of the day. Mag 7, you said you owned darn near all of them. And then 2025 came along.
They all went up again. Some of them a little, some of them a lot. I think Google may have may have taken the crown that year.
I think Alphabet and Nvidia saved the Mac 7. So
Tell us a little bit about after another big year. Are you still locked and loaded? Are you start starting to let go some of these guys? — I have five of the seven. I mean I did shed two and I think it might be worth talking about why.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai impact on valuations
- software innovator's dilemma
- capex overconfidence and debt risk
- corporate bitcoin balance sheets
- prediction markets
Companies and tickers mentioned
- OpenAI
Watch the episode
Watch “3 AI Stock Winners & 3 Write-Offs - Prof. Damodaran” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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