In a stark assessment published today, March 2, 2026, Aswath Damodaran—widely regarded as Wall Street’s “dean of valuation”—warned that the current AI frenzy has created a “big market delusion.” He pointed to sky-high valuations of AI firms, including OpenAI at $730 billion and Anthropic at $380 billion, as evidence of overconfidence among entrepreneurs, venture capitalists, and investors. Damodaran emphasized that not all players can succeed, yet few are considering that possibility, potentially leading to compressed margins and unmet expectations.
Damodaran also criticized extreme forecasts, such as those predicting mass white‑collar job losses and economic collapse by 2028, while acknowledging that AI could either advance too rapidly or fail to deliver, resulting in significant investment write‑offs. He advocates for a more moderate outlook: AI may function effectively but prove harder to monetize than anticipated. He further cautioned that markets are underestimating transition risks like de‑globalization and eroding institutional trust, even as he sees potential for strong global economic performance in 2026.
The warning comes amid a broader debate over AI’s economic impact. While AI promises productivity gains, Damodaran’s message serves as a sobering reminder that inflated expectations may distort valuations and obscure underlying risks. Investors, he suggests, should exercise caution and maintain humility in the face of AI’s uncertain trajectory.