NYU finance professor Aswath Damodaran is warning that an AI market correction could be more severe than the dot-com bust. His argument centers on the size of expectations now built into AI companies, infrastructure spending, and adjacent technology valuations.
The warning is important because AI’s investment cycle depends on expensive compute, rapid revenue growth, and confidence that adoption will justify massive capital expenditure. If any of those assumptions weakens, the correction could spread beyond model labs.
The point is not that AI demand is fake, but that the market has priced in an unusually large future. That raises the bar for execution across the whole ecosystem.