Aswath Damodaran
speaker
1,201 appearances
7 recordings
3 series
first heard May 2025
last heard 7 Aug
Aswath Damodaran’s voice in public audio — every appearance, attributed to the second.
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recordings per month · last 12 monthsRecordings per month over the last 12 months — 6 in all, peaking in Nov 2025 with 2.
Appearances
And this is in the top down.
These are more capital-intensive businesses.
As anybody who's run a capital-intensive business will tell you.
It's a very different business model, a much more difficult business model to generate value from than the models that they used to use pre AI.
These companies five years ago, if you asked me what their invested capital was, I wouldn't even have cared.
Because you knew that they could generate revenues and operating income with very little additional invested capital outside of acquisitions.
Even with RD considered, these companies generated returns of 70, 80, 90% invest capital.
The only survivor from that group is Apple, which still continues to deliver that kind of return, and analysts are not happy with it because it's not investing.
The other companies now are the equivalent of manufacturing companies.
They're building huge capacity for whatever AI products and services.
And like all manufacturing companies historically, they're now going to be judged on whether they can deliver the earnings on this investment, something they've never had to do historically.
So measures like return on investment capital that used to be not that useful with tech companies now come into
Play.
Questions are: Are you earning more than your cost of capital?
A laughable question five years ago with these questions with these companies now becomes a relevant question.
And I think that is the question on which these companies will live or die.
If they can manage to deliver returns that exceed their cost of capital, I think they can come out on the other side as more capital-intensive but still valuable companies.
But if they fail, markets are punitive on companies that invest a lot of capital and can't deliver the earnings to justify that capital.
I think the lesson that Facebook should have learned from the metaverse, investment fiasco.
Is investing is easy.
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