Aswath Damodaran, a finance professor at New York University Stern, warned that a future correction in the artificial intelligence (AI) market could be more severe than the dot-com crash. He highlighted that the current AI boom is driven by massive debt-funded infrastructure spending by global tech companies, marking one of the largest technology investments in history, according to livemint.com.
Damodaran explained that the scale of investment in AI infrastructure, largely financed through debt, raises concerns about sustainability. He emphasized that when the market correction occurs, the resulting financial pain could be intense due to the high leverage involved. His comments come amid a global race among technology firms to dominate AI capabilities, which has led to unprecedented capital deployment in the sector, livemint.com reported.
The warning underscores the risks associated with rapid expansion in emerging technologies, especially when fueled by debt. Comparisons to the dot-com crash of the early 2000s suggest that overvaluation and speculative investment in AI could lead to significant market disruptions. Damodaran’s perspective adds to growing scrutiny of AI investments as companies and investors weigh the long-term viability of current spending levels, per livemint.com.
Damodaran’s forecast was shared publicly on June 20, 2026, drawing attention to the financial vulnerabilities in the AI sector amid ongoing heavy investment. His analysis serves as a cautionary note for investors and industry stakeholders navigating the evolving AI landscape, according to livemint.com.