The Trouble With Tariffs + Why Palantir Could Dominate AI — ft. Aswath Damodaran
Feb 6, 2025
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In this engaging discussion, Aswath Damodaran, a finance professor at NYU Stern and renowned valuation expert, shares insights into the evolving AI landscape, particularly focusing on Palantir's potential to lead the market. He explores the disruptive impact of DeepSeek and its implications for traditional valuations. Reflecting on recent tariffs, Damodaran offers his perspective on whether Tesla and Nvidia may be overvalued and critiques Intel for its market punishment. It's a deep dive into how tech dynamics are reshaping investment strategies.
The recent tariff decisions illustrate a complex geopolitical landscape, potentially harming long-term relationships with Canada and Mexico despite short-term benefits.
Palantir's impressive quarterly performance and significant contract with the U.S. Army solidify its position as a potential leader in the AI space.
The emergence of DeepSeek indicates a shift towards lower barriers to entry in AI, creating a more competitive and diverse market landscape.
Deep dives
Fundrise Innovation Fund's Mission
The Fundrise Innovation Fund aims to democratize venture capital by providing access to investment opportunities in high-potential tech and AI companies with a $150 million portfolio. This fund is designed to allow investors of all sizes to participate in the venture capital market, which has traditionally been limited to wealthy individuals and insiders. The minimum investment required is just $10, making it accessible for many. This shift represents a significant step towards including more diverse investors in opportunities previously reserved for a select few.
Impact of Tariffs on Trade Relationships
Recent tariff decisions by President Trump to delay tariffs on Canada and Mexico for a month, while maintaining a 10% tariff on China, illustrate a complex geopolitical landscape. The discussion suggests that while these actions might provide short-term benefits to the U.S., they could lead to damaged long-term relationships with neighboring countries. Specifically, manufacturing clients have already expressed anxiety about renewing contracts due to tariff implications, showing the direct economic impact of these policies. This situation raises concerns about the potential fallout for cross-border relationships and stability in North America.
Palantir's Strong Market Performance
Palantir has recently experienced a significant stock surge, reflecting its robust fourth-quarter performance that surpassed market expectations across multiple metrics. The company reported a 22% increase in stock price after beating revenue forecasts, with notable growth in U.S. commercial and government sales, including a substantial contract with the U.S. Army. Palantir's impressive quarterly results have solidified its position as a leading player in AI, prompting investors to reassess its market value. The company's unique business model and firm ties with government contracts highlight its potential for continued success in the competitive tech landscape.
Vanguard's Fee Reductions and Its Implications
Vanguard's recent announcement to lower expense ratios on its actively managed and index-based funds by an average of 20% signals a shift towards minimizing costs for investors. This change is part of a growing trend favoring passive investing over higher-fee active funds, as evidenced by substantial capital shifts from active to passive funds. Lower fees can lead to significant savings for investors, reflecting Vanguard's commitment to improving access to financial services and fostering competition. The move underscores the importance of expense ratios in investment strategies, as they can greatly affect long-term returns.
AI Market Dynamics Following DeepSeek
The emergence of DeepSeek has sparked discussions about potential shifts within the AI market, prompting a reevaluation of previous growth narratives. Traditionally, the AI landscape was dominated by high-entry costs, but DeepSeek's approach suggests that there is now a viable path for creating products with lower barriers to entry. This shift could lead to a bifurcated market consisting of premium AI products requiring significant investment and low-intensity AI offerings that are more accessible. The broader implications include potential cost reductions for consumers and a more competitive landscape, although profitability may become challenging in the commoditized segment.
Scott and Ed open the show by discussing the potential tariffs on Mexico and Canada, Palantir’s earnings, and Vanguard’s largest fee cut ever. Then Aswath Damodaran, professor of finance at NYU’s Stern School of Business, returns to the show to analyze how DeepSeek’s rise reshapes the AI landscape. He shares why he hasn’t valued Palantir yet but still sees it as a potential AI leader and a prototype for the premium AI market. Aswath also weighs in on whether Tesla and Nvidia are overvalued, offers his views on tariffs, and explains why he thinks Intel has been overly punished.
