Big Market Delusion: Why Private Credit Is AI’s Biggest Loser | Aswath Damodaran (NYU)

Each AI company can price itself on an internally consistent story about winning its market. Sum those stories and the implied revenues exceed any market that could exist — the big market delusion. Aswath Damodaran puts a ceiling on it: $142 trillion in global revenues last year against $20–25 trillion in employee costs, which makes the $26 trillion addressable market in SpaceX’s IPO pitch fiction. The sharper question for credit investors is who absorbs the loss when it corrects.Full analysis: https://open.substack.com/pub/fixedfloating/p/financing-the-big-market-delusion?r=718tew&utm_campaign=post&utm_medium=web&showWelcomeOnShare=trueJosef Pschorn speaks with Aswath Damodaran of NYU Stern about valuing the AI boom, the corporate life cycle, and why the credit side of the build-out carries the asymmetric risk.Key takeaways: ​The biggest loser when the delusion corrects is private credit, not equity — lenders carry the downside without the upside, and “you can’t make interest payments withpotential and promise.” ​Financing should act its age: young companies should use converts or no debt; default risk belongs in the cash flows (value the firm twice, weight by survival probability), not in an inflated discount rate. ​In distress, equity is a call and debt is a put — a passive lender in a levered company is short an option whose variance the equity holder controls.Connect with Aswath Damodaran: https://pages.stern.nyu.edu/~adamodar/ | X https://x.com/AswathDamodaranConnect with Fixed + Floating: https://www.linkedin.com/company/fixed-floating | Xhttps://twitter.com/FixedFloating Fixed + Floating is for informational purposes only. Not investment, legal, or tax advice. Recorded: 15.06.2026#fixedfloating #creditmarkets #privatecredit #valuation #Damodaran