Valuation Guru Aswath Damodaran Flags Nvidia and Tesla as "Most Irrational" in Current Market
Aswath Damodaran, a distinguished finance professor at NYU Stern and widely recognized as the "Dean of Valuation," has voiced significant apprehension regarding the current market valuations of prominent technology companies. He has specifically identified Nvidia Corp. and Tesla Inc. as having the most irrational valuations in the contemporary market landscape.
Speaking on the Prof G Markets podcast on November 14, Damodaran conveyed profound skepticism concerning the present pricing of Nvidia, a leading artificial intelligence chipmaker whose market capitalization surpassed $5 trillion in 2025. According to Damodaran, the underlying financial projections supporting the chipmaker's stock price simply do not withstand rigorous examination. He elaborated that the expectations embedded in Nvidia's stock price, such as achieving perpetually high gross margins of 80% on revenues exceeding a trillion dollars, are unrealistic and unsustainable.
Damodaran categorized Tesla within the same "irrational" bracket, albeit for distinct reasons. While Nvidia's valuation is deemed to suffer from excessive mathematical assumptions, Damodaran contended that Tesla's core issue lies in a lack of fundamental coherence. He expressed uncertainty regarding Tesla's identity as a company, stating that he is unsure of its future narrative, implying that even the company itself might not have a clear long-term vision.
The professor's pessimistic outlook was not confined to these individual stocks but encompassed a broader warning about the "Magnificent 10" tech stocks. These companies collectively constitute approximately 40% of the S&P 500's total market capitalization. Damodaran cautioned that in the event of a market correction, there would be "no place to hide," suggesting that a substantial downturn in these leading companies would trigger ripple effects across the entire market, adversely affecting index funds and passive investors.
Despite his critical assessment of market leaders, Damodaran singled out Alphabet Inc. and Amazon.com Inc. as the "least overvalued" among the large technology firms. He proposed that companies such as Amazon possess clearer strategies for monetizing efficiency, rather than solely relying on the prevailing "AI boom" narrative. Reflecting his concerns, Damodaran revealed that, for the first time in his professional career, he is reallocating portions of his personal investment portfolio into cash and even contemplating investments in collectibles, acknowledging this as an uncharacteristic move for a value investor. He concluded by asserting the difficulty of finding any undervalued major tech stocks, implying that current market prices offer no genuine bargains.