Excess Returns

Professor Aswath Damodaran joins Kai Wu on The Intangible Economy to break down how to value SpaceX, AI companies, intangible assets, and the future of value investing.
We discuss why big markets do not automatically create big value, how AI CapEx is changing the character of major technology companies, and why the best investment stories still have to connect to the numbers.
Subscribe on Spotify⁠⁠
⁠⁠Subscribe on Apple
Topics covered:
Valuing SpaceX after its IPO and why price matters even for great companies

How Starlink, space launch, and xAI fit into SpaceX’s valuation story

Why total addressable market can mislead investors in AI and other disruptive industries

The problem with AI unit economics, data centers, power, water, and reinvestment needs

Why growth can destroy value when margins and returns on capital are weak

How intangible assets, R&D, future growth, and narratives should show up in valuation

The Big Market Delusion and how overconfidence drives boom and bust cycles

Why AI CapEx is different from the dot-com boom and could create broader risks

How AI is changing the character of the Magnificent Seven and semiconductor companies

Why value investing became rigid, ritualistic, and righteous, and how it can evolve

Timestamps:
00:00 Why great companies can still be bad investments
01:03 Introducing Aswath Damodaran and The Intangible Economy
01:49 SpaceX IPO, Starlink, xAI, and the challenge of valuing uncertainty
05:31 Why Starlink became the core of SpaceX’s current revenue
10:31 How Damodaran valued SpaceX across launch, connectivity, and AI
14:07 Why AI’s huge market may still have difficult unit economics
17:10 The tension between SpaceX competing in AI and renting data centers to competitors
20:00 Why valuation should use distributions instead of false precision
22:39 How stories and numbers work together in valuation
26:45 Why investors confuse promises, potential, and businesses
30:49 The Big Market Delusion and overconfidence in AI investing
33:02 Why the AI CapEx boom is different from the dot-com bubble
35:17 How AI infrastructure is changing the Magnificent Seven
38:36 Nvidia, Micron, semiconductors, and the risk of peak cycle earnings
41:00 Why the biggest AI market stories could be scary for society
43:37 AI disruption, labor markets, and the speed of technological change
46:30 Measuring which jobs and companies are most exposed to AI automation
49:00 Why AI cost structure may look more like Spotify than software
51:13 The unresolved business model questions for LLMs and AI agents
52:29 Why traditional value investing lost its edge
56:03 Passive investing, book value, and the blame game in value investing
58:13 Why rigid value investing is vulnerable to AI disruption
01:00:58 How value investing can adapt to intangible assets and uncertainty
01:02:21 Why any company can be a good investment at the right price
01:04:57 Why investing mistakes and track records are harder to judge than they look

In the third episode of First Principles with Andy Constan, Andy breaks down the changing structure of markets as the IPO window reopens, AI CapEx accelerates, and corporate buybacks shift toward new equity supply. We discuss what the SpaceX IPO says about capital markets, whether AI spending can create disinflationary growth, why the consumer is still holding up, and what could challenge the current market bubble.
Follow First Principles on Spotify
Follow First Principles of Apple Podcasts
Topics covered:
Why IPOs are central to the purpose of public markets

How Andy evaluates whether the SpaceX IPO worked

Why issuers may want IPOs to trade higher after pricing

The shift from stock buybacks to new equity issuance

Why AI CapEx is changing the supply and demand for shares

How hyperscaler spending is being funded through cash, bonds, and stock

The economic test for whether AI investment pays off

Disinflationary productivity growth versus labor displacement

Why the current economy is still supported by consumption

The role of wealth effects and consumer dissaving

Why falling oil prices may not eliminate inflation pressure

What Andy is watching in Fed policy, tariffs, AI CapEx, and equity issuance

How Kevin Warsh could approach rates, QT, and the Fed balance sheet

Timestamps:
00:00 Intro and key themes
04:18 How Andy reads the SpaceX IPO
08:27 Why underwriters and regulators want IPOs to work
13:00 Why issuers may want IPOs to trade higher
17:05 From stock buybacks to new equity supply
21:06 The 600 to 700 billion dollar shift in share supply
26:42 The economic test for AI tokens
32:09 Can AI create disinflationary productivity growth?
38:10 Is AI CapEx holding up the economy?
41:00 Wealth effects, dissaving, and the consumer
45:52 Oil prices, war, and inflation
49:07 Jalen Brunson, incentives, and long-term value
52:00 Fed policy, tariffs, and what matters this summer
55:36 Kevin Warsh, QT, and the Fed balance sheet
58:42 Closing thoughts
No information on this podcast should be construed as investment advice. Securities discussed in the podcast may be holdings of the firms of the hosts or their clients.

In this episode of The OPEX Effect, Jack Forehand and Brent Kochuba break down the market structure impact of the SpaceX IPO, options expiration, dealer gamma, volatility, and the next major setup for the S&P 500 and Nasdaq. They discuss why SpaceX may trade more on flows than fundamentals, how call buying could create a gamma squeeze, and why June OPEX, VIX expiration, FOMC, oil, Iran headlines, and index inclusion could all collide at once.
Subscribe to the OPEX Effect on Spotify⁠⁠
⁠⁠Subscribe to the OPEX Effect on Apple Podcasts
Topics covered:
Why SpaceX is a flows game at the start of trading

How the SpaceX IPO could affect liquidity across mega cap tech stocks

Why fundamentals may not matter when index flows and forced buying dominate

The role of Nasdaq, Russell, and S&P 500 index decisions in SpaceX trading

How options could create a gamma squeeze in SpaceX

Why dealer hedging flows can push stocks higher or lower

What June options expiration could mean for the S&P 500

Why VIX expiration and FOMC create a key market window

How Core1M signaled the recent volatility spasm

Why expensive calls, not put buying, drove the recent market stress

The key S&P 500 levels Brent is watching into OPEX

How oil, rates, inflation, and Fed policy could affect market volatility

Why Nasdaq options pricing is diverging from the S&P 500

How SpaceX index inclusion could widen the gap between Nasdaq and the S&P

What would make Brent add protection or look for another short-term market correction

Timestamps:
00:00 Opening clips and the SpaceX flow setup
05:27 Elon Musk net worth after the SpaceX IPO
07:13 SpaceX, liquidity, Mag Seven selling, and index demand
12:48 Why SpaceX may trade on flows before fundamentals
17:59 What options trading could change for SpaceX
22:05 How call buying can create a gamma squeeze
28:24 Why June OPEX matters more than a normal expiration
33:55 VIX expiration, FOMC, and market path dependency
37:20 The Core1M signal and the recent volatility spasm
41:22 The S&P 500 gamma map and key risk levels
46:25 Why expensive calls drove the market stress
50:14 Oil, rates, inflation, and the Fed setup
57:03 The JPMorgan collar and the 6900 to 7000 support zone
58:32 Nasdaq versus S&P 500 after the SpaceX IPO
01:03:14 Brent’s summary, SpaceX gamma squeeze risk, and the next market setup

Mike Green joins Excess Returns to explain why passive investing, index construction, SpaceX, AI IPOs and mega-cap concentration may be changing how the stock market actually works. We discuss how passive flows can affect prices, why AI earnings may be more circular than investors think, what could break the current market narrative, and why the economy feels much weaker for many households than the headline data suggests.
Michael Green Twitter
https://x.com/profplum99
Simplify Asset Management
https://www.simplify.us/
Topics covered:
Why the SpaceX IPO has turned passive investing into a mainstream market structure debate

How index committees and passive flows can influence individual stocks

Why low float, Nasdaq demand and passive buying could create unusual IPO dynamics

How new AI-related equity issuance could change the supply-demand balance in the stock market

The research behind passive flows, market impact and cap-weight concentration

Why Mike thinks passive buying explains more of mega-cap outperformance than AI fundamentals

The circular financing risk in AI, including Nvidia, CoreWeave, Google and Anthropic

Why buy-the-dip flows, ETFs, CTAs and vol control funds matter for market direction

How headline economic data can miss household stress, second jobs and lost purchasing power

What Mike is watching to see whether the AI trade and market narrative are starting to break

Why AI may be hugely valuable to consumers before it creates major business productivity gains

How companies may eventually redesign business models around AI rather than simply automate tasks

Why SpaceX wealth creation could seed the next generation of competitors

How inflation, gasoline prices, low savings and a K-shaped economy are affecting consumers

Timestamps:
00:00 Passive indices, AI profits and why this market feels different
04:07 Why SpaceX changed the passive investing debate
08:01 The research behind passive flows and market impact
12:16 Why Mike thinks passive flows explain mega-cap strength
16:18 ETF flows, buy-the-dip behavior and bubble dynamics
20:28 Why economic data can miss household stress
25:13 Bubble warnings, CAPE and what investors may be ignoring
29:17 AI as a consumer advice engine versus a productivity revolution
33:29 How businesses may redesign themselves around AI
37:51 Why IPO wealth may create the next generation of competitors
42:06 Mike Green’s upcoming book on passive investing and market structure

AI could become the next general purpose technology, reshaping economic growth, inflation, interest rates and portfolio construction. Vanguard Global Chief Economist Joe Davis joins Excess Returns to explain why AI, demographics, fiscal deficits and globalization may define the next decade for investors, and why the biggest market winners may eventually come from outside the technology sector.
Coming into View: How AI and Other Megatrends Will Shape Your Investmentshttps://amzn.to/4v8L7OfVanguard Megatrends Research Hubhttps://explore.vanguard.com/megatrends.html
Topics Covered:
AI as a potential general purpose technology
Why long-term megatrends can affect short-term market returns
The four forces shaping the next decade: technology, demographics, deficits and globalization
Why Vanguard believes AI could lift U.S. growth above consensus
How AI could offset aging demographics and rising debt
Why great technology cycles often include major stock market drawdowns
The difference between AI automation, augmentation and new industry creation
Why the next AI winners may be in healthcare, financial services and other service industries
The risk that AI disappoints and fiscal deficits dominate the outlook
How tariffs, oil prices and AI investment interact in the macro outlook
What AI could mean for 60/40 portfolios, value stocks, fixed income and international markets
Joe Davis’ lesson for average investors: the power of compounding
Timestamps:
00:00 Why every great technology eventually faces a market drawdown
04:28 The four megatrends shaping the economy
08:56 How megatrends explain short-term S&P 500 moves
13:22 Why AI may be in the 1996 or 1997 stage
18:29 Where the next AI winners could emerge
21:44 AI, fiscal deficits and the danger of kicking the can
26:17 Why 2% growth and 2% inflation may be unlikely
30:31 How to tell if AI augmentation is really working
33:19 AI, globalization and which countries could benefit
38:14 Why investors need a multi-factor macro scorecard
41:23 What AI means for the 60/40 portfolio
44:12 Joe Davis on investing, compounding and Vanguard’s megatrends research