CONCEPT
Big Market Delusion
Damodaran's 2020 formalization — applied to AI by Kindleberger's framework — of the pattern by which perceived large addressable markets attract more capital than the market can support, with every entrant assuming dominant share.
Aswath Damodaran's concept of the big market delusion names the recurring pattern by which a perceived large addressable market attracts aggregate capital investment that exceeds what the market can rationally support. Each entrant assumes dominant share. The implied total market share across competitors exceeds one hundred percent. The capital that would be justified if any single company achieved its projections is invested multiple times over. When the market matures and actual market shares become visible, the aggregate capital must be repriced — and the repricing destroys the companies whose valuations implied market shares they never had any realistic chance of capturing.
In The You On AI Field Guide
The AI market exhibits big market delusion dynamics with unusual clarity. Every major AI company is valued on projections that imply it will capture substantial share of the knowledge economy. OpenAI at $500 billion. Anthropic at comparable scale. Google, Microsoft, Meta all making infrastructure investments that assume dominant positions.