AI Bubble Risk Could Be Worse Than the Dot-Com Bust Because So Much More of It Is Debt-Funded
rohanpaul_ai · x · 2026-07-26
Economist Aswath Damodaran argues that an AI bubble would be riskier than the dot-com bust because it is being built on far larger capital expenditure and, crucially, debt.
His main point
- The dot-com cycle was mostly equity-funded, so the damage stayed concentrated among shareholders.
- The AI boom is different: the infrastructure buildout is enormous, and a meaningful share is financed through debt from private capital.
- If the cycle turns and companies cannot service that debt, the fallout could spread beyond investors into the broader economy.
Why he thinks the correction would hurt more
Damodaran says the pain from an AI correction would not just be a 90% stock drop. Debt distress and defaults could create spillover effects similar to what happens when lenders overreach — though he stops short of calling it another 2008.
Related event: Scholar Warns AI Bubble Burst Could Be Worse Due to Heavy Debt Reliance(2 posts)→
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