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Valemail

 

The emails for this class will be collected on this page, arranged chronologically. Since I send quite a few, you can target it on a specific month by going here:

Date
Email content
1/8/25
I am sure that you are finding that break is passing by way too fast, but the semester will soon be upon us and I want to welcome you to the Valuation class.  One of the best things about teaching this class is that valuation is always timely (and always fun...) Just as examples:Is Nvidia’s big run over? How much is AI worth? Is Juan Soto really worth $745 million to the Mets? How much value did Lionel Messi add to MLS by playing for Miami? And how about Taylor’s Swift’s effect on the valuations of NFL franchises? 

1. Preclass work: I  know that some of you are worried about the class but relax! If you can add, subtract, divide and multiply, you are pretty much home free… Seriously, all I need of you is a familiarity with basic finance, accounting and statistics.  If you feel shaky, you may want to check out the online classes that I have on accounting, financing and statistics basics:
1. Accounting class (I am not an accountant, don’t care much for how accountants think about companies and view accounting as a raw material provider.. This class reflects that view): http://people.stern.nyu.edu/adamodar/New_Home_Page/webcastacctg.htm 
2. Basics of finance (present value, a dash of this and that….): http://people.stern.nyu.edu/adamodar/New_Home_Page/webcastfoundationsonline.htm 

2. For this class: If you want to get a jump on the class, you can go to the class web page:
As the schedule stands right now, we will meet on Mondays and Wednesdays from 3.3p pm - 4.45 pm  in Paulson Auditorium, starting on January 23. I would obviously like to see you in person, if you can male it. However, if you have to miss a class or two, because the classes will be recorded and available on three platforms:
a. My website: The recordings of the sessions, with all of the material (slides, links, other) that I use during the session will be available on the webcast page for the class: 
b. Brightspace: The is the NYU learning management system. The recordings of the lectures will be accessible here, as well.
c. YouTube Channel: There is a third option, if your broadband connection is not that great and you are watching on a Tablet/smartphone. There is a YouTube playlist for this class, where all class sessions will be loaded.


  When you get a chance, check it out.

3. Syllabus & Calendar: The syllabus for the class is available on the website for the class and is also linked here:
and there is a google calendar for the class that you can get to by clicking on 

 

For those of you already setting up your calendars, it lists when the quizzes will be held and when projects come due. 

4. Lecture notes: The first set of lecture notes for the classes available now. 
I no longer make print copies, since you can download the pdf or ppt files, and you can print them if you want. The fi

5. Books for the class: The best book for the class is the Investment Valuation book - the fourth edition just came out, It is obscenely over priced and you can live without it. If you do really want to get a copy and have limited resources, the third edition should be on sale... If you are the law-abiding type, you can buy "Damodaran on Valuation" - make sure that you are getting the second edition. Or, as a third choice, you can try The Dark Side of Valuation, again the second edition, if you are interested in hard to value companies.. Or if you are budget and time constrained, try "The Little Book of Valuation” (though a new edition will be out in about three months). Finally, if you really want to take a leap, try my storytelling book, Narrative and Numbers at 
You will find the webpages for all of the books at http://www.stern.nyu.edu/~adamodar/New_Home_Page/public.htm. If you want a comparison of the books, try this link: http://people.stern.nyu.edu/adamodar/New_Home_Page/valbookcomp.html 


6. Valuation apps: One final note. I worked with Anant Sundaram (at Dartmouth) in developing a valuation app for the iPad or iPhone that you can download on the iTunes store: http://itunes.apple.com/us/app/uvalue/id440046276?mt=8 
It comes with a money back guarantee...  Sorry, no Android version yet…  

I am looking forward to seeing you in two weeks in class.  Let’s hope that the world holds together until then! Until next time!
1/15/25
It’s been a week since my last email, and while not a whole lot has happened, I thought I should check in ahead of next week’s class. First, if this is the first email you are reading, then you should catch up with the earlier one, which are available at the link below:
http://www.stern.nyu.edu/~adamodar/New_Home_Page/eqUGemail.html
If you are wondering about the logistics (exams, projects etc.), we will start the first class with the syllabus, which will also lay out the themes for the class:
https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/eqUGsyllspr25.pdf
As you go through the syllabus, you will notice mention of a project and you can find the details of that project here:
https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/eqprojspr25.pdf
Once we are through the syllabus in session 1, we will turn to an introductory packet (of about 20 pages). The link to that package is below:
https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/ValIntroSpr25.pdf
Please have this ready for the first session. The rest of the class will be covered in the lecture note packets, and I sent you the link to the first one last week (but here it is again):
https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/valpacket1spr25.pdf 

Having drowned you with all of that stuff, let me hit with you some pre-class reading (and I don’t think it is too painful). I don’t do much academic research and am supremely uninterested in writing for an echo chamber. Much of what I have written that is original or different has be initially (at least) on my blog.  I spend the first few weeks of each year, talking about the data that I update on my website:
http://www.stern.nyu.edu/~adamodar/New_Home_Page/data.html
The first update is on my blog and the second one will be up in the next day or two. Please browse through them, because they are relevant for class:
https://aswathdamodaran.blogspot.com/2025/01/data-update-1-for-2025-draw-and-danger.html
The first class will be a week from today (Wednesday, January 22, from 3.30 pm - 4.45 pm, NY time) in Paulson Auditorium. Please do come, if you can. If you are unable to, the session will be recorded and accessible by later that day. I am looking forward to seeing you next week. Until next time!
1/21/25
I hope that this is not the first email that you are getting about this class, but if it is, you may want to check out the previous emails that I sent out at this link:
https://pages.stern.nyu.edu/~adamodar//New_Home_Page/eqUGemail.html 
As for tomorrow, we will meet at 3.30 pm in Paulson Auditorium. I assume that you know where that is, but if you do not, it is the UC level of Tisch (I think the room number is UC 50). I really, really would like to see you in person, but if whatever reason you are unable to make it, this zoom link will put you in the class live:
https://nyu.zoom.us/j/98889492887
If you are unable to make the class live, a recorded version will be on YouTube later tomorrow night.
https://pages.stern.nyu.edu/~adamodar//New_Home_Page/webcasteqUGspr25.htm
As for what you should bring to this class, bring your syllabus, project description and the Valuation Intro slides (all links available in the webcast page above). 
1/22/25 Hi,
We are officially rolling. If you enrolled in the class in the last couple of days, you did miss the first two emails but they are already in the email chronicle, in case you are interested:
This chronicle will be updated at the end of each week to include all emails sent up until then. During the session, I told you that that this was a class about valuation in all of its many forms – different approaches (intrinsic, relative & contingent claim), different forums (for acquisitions, value enhancement, investing) and across different types of businesses (private & public, small and large, developed & emerging market). After spending some time laying out the script for the class (quizzes, exams, weekly tortures), I laid out the philosophical foundations for valuation, by noting that it is a bridge between story and numbers and that it is different from pricing. Next session, we will spend a little time talking about the project that will run through the entire semester, but you can get a jump by trying to find a group and a company (each of you will be doing a company). Here is the project description:

You can also get ahead by doing the following.
  1. Group: Please do find a group to nurture your valuation creativity, and a company to value soon. In terms of limits, I would like the group to have at least four people and at most seven (though if you make a compelling case, I will let you add an eights…) I would prefer not to be involved in group creation, but if you do have trouble finding a group, I will work on resolving that problem.
  2. Company Choice: Once you pick a company, collect information on the company. I would start off on the company's own website and download the annual report for the most recent year (probably 2022, though quite a few will be reporting their 2023 numbers this week and next) and then visit the SEC website (http://www.sec.gov) (for US listings) and download 10Q filings. (You can pick any publicly traded company anywhere in the world to value. The non-US company that you value can have ADRs (but does not have to have ADRs) listed in the US, but you still have to value it in the local currency and local market. You can even analyze a private company, if you can take responsibility for collecting the information.)
  3. Webcast of today’s class: The web cast for the first class are up and running. You can access it by going to:https://pages.stern.nyu.edu/~adamodar//New_Home_Page/webcasteqUGspr25.htm. The links to the downloadable files (video and audio) and the YouTube version are also up.
  4. Lecture Note Packets: You can download the lecture note packet online. It is available at the top of the webcast page (see link above) in either pdf or ppt format. 
  5. Post class test: To review what we did in class today, I prepared a very simple post-class test. I have attached it, with the solution. Give it your best shot. This is something you will see after every class. It should take about 10 minutes for each class, and can help you review the class.
Finally, I mentioned my blog, where I dabble in all things finance. If you are interested, I put my thoughts on US equities, leading into 2025 in my second data update for 2025.
1/23/25
First things first. The links to yesterday’s class are now fully up and running. If you were not at the class, or mentally absent, please do watch the class. Each week, I will use the Thursday email to prod, nag and bug you about the project. So, without further ado, here is where you should be this first week:
  1. Find a group: The groups are yours to create and you should try to have at least 4 people in a group and not more than 8 (that limit is for your own protection).  If you are being ostracized and no one wants you,  you can add your name to the orphan list for the class: https://docs.google.com/spreadsheets/d/10e7v7gCwcMNA7olNJQaLZshiacUjf4BKkp6dUah1pXk/edit?usp=sharing.  Once you put your name down on the list, keep checking the list to see if there are other orphans you can team up with. If you are a group of three or four and would like to adopt an orphan, please check out the group as well
  2. Pick a company: This will require some coordination across the group to make sure that you meet the minimum criteria (at least one money loser, high growth, emerging market, service company). In making this choice, remember that you can value any business you want, public or private, small or large, listed in any market. There are at least a couple of entrepreneurs in the class who are valuing their own businesses and  quite a few valuing privately owned family businesses. Once you have picked a company, please enter your company name in the Google class master spreadsheet. Don’t worry about what other people are picking as their companies, since more than one person can value the same company. (If you cannot find your name on the master sheet, you re not shown as enrolled in the class. That could be a registration problem or a delay, if you joined the class late: https://docs.google.com/spreadsheets/d/1uX8W1Eu8f9B3dEVcUfJLkurMGbmb86IwcS9BFSvSPLc/edit?usp=sharing 
  3. Annual Report: Find the most recent annual report for your company. If you are valuing a private business, just ask for income statements and balance sheets for as long as you can get them (I will assume that you know the owner or better still, you are the owner).
  4. Public filings: If your company has quarterly reports or filings pull them up as well. 
In doing all of this, you will need data and Stern subscribes to one of the two industry standards: S&P Capital IQ (the other is Factset). As Stern students, you should have access to Capital IQ on the Stern Dashboard, but you need to ask for access, I have attached a pdf file that shows you how. Until next time!
1/24/25 A few quick notes. The first is that I did put up an in-practice webcast today. It is a very basic webcast on how to read a 10K, using P&G as my example. The links are below:
It is a very old webcast,and I need to do a newer version, but I am way too lazy.

For those of you who are late to this party, we have run out of beer and chips, but you can read all of the emails that I have sent so far in the class:
If you read them all, it is the equivalent of drinking a six-pack. So, please don’t drive or operate heavy machinery! And if you are under 21, don’t read it at all!

Finally, I sent out the master Google shared spreadsheet for this class, and asked you to fill out whether you are part of a group and the company you have picked. The link I sent you yesterday did not allow you to edit the file, but you can edit this one:
If you do pick a company, and change your mind, it is reversible. It is better to pick a  company early, rather than waiting.

My office hours: I know that it is still early in the class and office hours are not on your mind, but they will be soon. Let me start with my office hours, which are scheduled as you know for most weeks from12 pm - 1.15 pm, NY time, on Mondays and  from 12 pm - 1.15  pm, NY time, every  Wednesday.  You are welcome to come by my office at KMEC 9-69, if you have questions, and I would love to meet you in person. If you cannot make it, the office hours will be zoomed and the zoom link is below:
Please remember that people in my office will get first dibs and you may have to wait a while.

TA Office hours and review sessions
You have two TAs for the class and their office hours are below:
Kasha Bhatia, Monday from 12.30 - 1.30
Eleanore (Peiwen) Zeng, Thursdays from 11:00-12:00
They will also offer an in-person weekly review session, from 2 pm - 3  pm every Wednesday, in where they will cover problems from past quizzes and exams, related to the material of the week. They will reach out to you with further details.
1/25/25
This is the first week, and you should not be (hopefully) lost yet, but I thought I would start you on the newsletters. The first newsletter is attached, and as you can see, there is very little news. That said, here are some things you should be working on this weekend.
1. Find a group
2. Pick a company
3. Download the introductory slide packet as well as packet 1 for the class.
Have fun the rest of this weekend, because I have diabolical plans to ruin the rest of your weekends this semester. 

Attachment: Issue 1 (January 25)
1/26/25

My Sunday email usually includes a solution to the weekly challenge, but since we did not have one last week, I will keep this short. This week, we will start by looking at what I call the Bermuda Triangle of Valuation, where bias, uncertainty and complexity conspire to take you down, before starting on looking at the approaches that you can use to put a number on an asset or business. During tomorrow's class, we will start  with a test (don’t freak out.. It is not for a grade) by looking at biases that drive valuation outcomes. I have attached the bias test for you to take a look at, and trust me, you will be able to answer the questions even if you have never done a valuation in your life. Until next time!

Attachment: Bias test for class for 1/27
1/27/25
Today's class started with a test on whether you can detect the direction bias will take, based on who or why a valuation is done. The solutions are posted online on the webcast page for the class. We then moved on to talk about the three basic approaches to valuation: discounted cash flow valuation, where you estimate the intrinsic value of an asset, relative valuation, where you value an asset based on the pricing of similar assets and option pricing valuation, where you apply option pricing to value businesses. In our discussion of DCF valuation and how to make it work for you, I suggested that there were two requirements:  a long time horizon and the capacity to act as the catalyst for market correction. We will start the next class with both the time horizon and catalyst questions, but there is one group of investors that may be able to provide the catalysts for market corrections: activist investors (people like Carl Icahn, Bill Ackman(. If you are interested in getting a sense of who these investors are, take a look at this site, which lists the biggest ones (and the names of the entities that they use as vehicles… 
https://www.swfinstitute.org/fund-manager-rankings/activist-investor
In the meantime, if you have not been getting the emails (and you are checking this on the email chronicles, it is probably because you are checking under the wrong email address. Everyone who takes a Stern class is given a @stern.nyu.edu address, and you may not be aware of it. You can head over to 'start.stern.nyu.edu' to activate your account.You can also go to this website to see how to to h access your emails:
https://it.stern.nyu.edu/popular-topics/stern-account

Attachment: Post-class test and solution.
1/28/25
It is time for the valuation of the week, and I had initially planned on making it Nvidia. But after an eventful weekend, I will have to revisit my story and valuation for Nvidia, and I promise it is coming in a future week, sooner rather than later. Instead, I am going to do a valuation that may allow you to answer the question I asked most in market interviews: Is the market in a bubble? Is it overvalued? Given there is so froth in this response, I value the S&P 500 index at regular intervals, and at the start of 2025, after two very strong years for US equities, I valued the S&P 500 index and wrote about in my second data update post for 2025:
https://aswathdamodaran.blogspot.com/2025/01/data-update-2-for-2025-party-continued.html
I am not going to claim that it is scintillating reading, but I don’t think it is that boring, and I would like you to start with that. In the post, I also share the spreadsheet that contains my valuation:
https://pages.stern.nyu.edu/~adamodar/pc/blog/S&PValueJan2025.xlsx
Please download that spreadsheet, and here is what I would like you to do. In the spreadsheet, there are four levers that drive the index value:
  1. T.Bond rate; At the start of 2025, it was at 4.58% and I have left it at that level (since I am terrible at forecasting interest rates), but if you feel that rates will move (in one direction or the other), I let you change the rate (change the answer on the cell below to yes, and enter your target rate).
  2. Equity risk premium: I used an equity risk premium of 4.50%, higher than it has been historically, but lower than the premiums we have seen since 2008. (The worksheets containing the equity risk premiums, implied and historical, are a worksheet). If you have a macro story to tell, and believe that story contains risks that demand a higher equity risk premium, replace my premium with your estimate, either as a direct input, or using one of my calculated choices)
  3. Earnings: The cash flows come from estimates of earnings for future years from analysts who track the index. I have their earnings for 2025 and 2026 as a default, and the subsequent year earnings build off that. If you feel that earnings estimates may be too optimistic or pessimistic, I give you the option of changing them, by applying a discount (-10%, -20% etc.) to the earnings or a premium (+10%, +20%) to the number.
If your response is that you really don’t have a point of view, leave the number as is. When you are done, go to this Google shared spreadsheet, and enter your numbers. 
https://docs.google.com/spreadsheets/d/1ICGB1xcqQHYsiltPq7c2MNbRkuoJlpadpWoaVWdJoiE/edit?usp=sharing 
The last column of the spreadsheet will compute how under or over valued you find the market, and the table to the right will give you the crowd judgment. Clearly, with 500 people in the two valuation classes (undergraduate and MBA), that willl be a big crowd, if you chose to partake, but I have also made this spreadsheet open to the public, and the tribe may multiply. It should take just a few minutes of your time, and I think it will be worth it. 
1/29/25
We started class by completing the discussion of approaches to valuation, talking about pricing and real options, at least in a big picture sense. We then began our intrinsic value discussion by talking about the weapons of mass distraction. If you want to read the blog post I have on the topic, try this link:
http://aswathdamodaran.blogspot.com/2014/03/if-it-is-strategic-growth-investment-in.html
We then spent some time setting up the process of discounted cash flow valuation, arguing for consistency in discounting. If the cash flows that you are discounting are cash flows to equity, estimated either as dividends or as potential dividends, the discount rate should be the cost of equity. If the cash flows that you are discounting are pre-debt cash flows, i.e,, cash flows to the firm, the discount rate has to be the cost of capital. Done right, the value of equity should be equivalent with both approaches. We also introduced “The IT propositon’ arguing that for it (control, synergy, AI or ESG) to affect value, it has to affect either the cash flows or the discount rate. 

Try the weekly challenge that I will send out on Wednesday, if you do not believe me. Next session, we will start with a discussion of risk free rate, a foundational number that will drive the rest of our calculations. I have attached a post class test for today, with the solution, but I think that four of the questions relate to risk free rates, which we have not covered yet. So, if you want to wait until Wednesday’s class, you might have an easier time. 

Attachments: Post-class test and solution.
1/30/25
By now, you should have a company picked, and if so, you can start thinking about at least the first piece of your discount rate calculation, a risk free rate. Currency is a choice and you can choose to value your company in any currency, though the currency in which your financials are reported is a good place to start. Of course, if that currency happens to have a 100% inflation rate, you may rethink your choice. Next week, we will start with how to estimate a riskfree rate in any currency, and if you want to get a jump on that process, try to find a ten-year government bond rate in the currency of your choice. That is of course trivial, if you are working in US dollars, since the 10-year treasury bond rate is available almost everywhere (including on the entry page to the Wall Street Journal). If you are working in Vietnamese Dong, this will be trickier, but this site is pretty good on that front:
https://tradingeconomics.com/bonds
If you cannot find your currency on this list, don’t worry. There are only about forty currencies with government bonds, and we will address how to estimate the riskfree rate for currencies with no government bonds.

This is the 12th or 13th email for the class. If you have not been receiving these emails (which means that you are reading this in the chronicles), it is worth noting that I don’t keep an email list for the class. I use the Google groups that Stern creates. In theory, students registered for the class should be on Albert (the NYU official registration/grading site), Brightspace and Google Groups, and the three should be synced, but this is a university. What should be true in theory is not always the case in practice. I can do very little to alter the Google groups. If you are finding yourself locked out of the email list, start with IT, and if they won’t help, I will figure out a way to add you in. If you are a non-Stern student, and have an email address that does not end in@stern.nyu.edu, note that you were assigned a stern email address when you joined this class, and you should be able to find that address. Here is what I got from IT when I asked:
Since you are teaching a Stern course, all your students, exchange and non-Stern, are provided with a Stern account and Gmail.
You can have them all head over to 'start.stern.nyu.edu' to activate their account. You can also provide them our website in regards to how to access their emails:
Hope that helps.

Finally, I am glad to see many of you are trying your hand at the S&P 500 index valuation (https://docs.google.com/spreadsheets/d/1ICGB1xcqQHYsiltPq7c2MNbRkuoJlpadpWoaVWdJoiE/edit?usp=sharing). The shared spreadsheet now has about 57 valuations. Let’s see if we can get that number to a couple  of hundred by the end of the week. 
1/31/25
I described valuation as a craft, where just when you think you have got things nailed down, the market throws you a surprise. This week’s big story has been DeepSeek, and while its initial impact has been on market prices, the bigger question is how it will change not just the AI business, but other businesses that interact with it. With the caveat (and I mentioned this to my corporate finance class as well) that I know far less about computed chips than I do potato chips, I decided to put down my novice thoughts about how I see DeepSeek playing out in markets. What started as a short note expanded on my flight from New York to San Diego into a longer note (the nice thing about writing in planes is that you have no distractions, and UnitedWiFi is so crappy that paying money for it is a waste). The post just went up a few minutes ago, typos and all (I would love to claim that I leave the typos in to show that it was not written by my bot)
As I said, I don’t have the answers, but this is my take, and I would love to hear yours. (The post includes an advance look at your valuation of the week, which will be Nvidia)

A few quick notes. The first is that I did put up an a tools webcast today.on collecting data. The link is below:

https://www.stern.nyu.edu/~adamodar/podcasts/Webcasts/gettingdata.mp4


Second, for those of you who have already valued the S&P 500 (the first valuation of the week), thank you! For those of you who have been putting it off, there is still time to add your input to the crowd:
If you scroll to the right, and towards the top, you will see the average and median values that the crowd has estimated. When you value a company or a market index, it is good to disagree with other people’s stories, as long as you are willing to replace them with your own. My Tesla post in January 2023 evoked a lot of responses and I wrote a post about disagreements that make sense and disagreements that violate first principles:

For those of you who are late to this party, we have run out of beer and chips, but you can read all of the emails that I have sent so far in the class:
Finally, I know that some of you are having trouble finding groups for the project work, there does seem to be a critical mass (19 people) on the orphan sheet (https://docs.google.com/spreadsheets/d/10e7v7gCwcMNA7olNJQaLZshiacUjf4BKkp6dUah1pXk/edit?usp=sharing)   Why not reach out to other people on the list (their email addresses are in the list) and see if you can create groups of your own?
2/1/25
1. First things, first. Your newsletter is attached for the week.

If you did not realize that there was first one, you can find them here:
https://pages.stern.nyu.edu/~adamodar//New_Home_Page/newsletters.html 
Click on your class.

2. Company choice & groups: I was checking the valuation master sheet:
I notice that a lot of you have not picked a company yet. If you have already and have just not entered the company name (not symbol), please do so. Do not enter any numbers yet for the DCF value or price per share. That’s coming in future weeks.

3. Orphans up for adoption: If any of you are in groups that would like an extra person, please check this list:
If you are on this list, but you have found a group, please take yourself off the list. If you are on the list, and not found a group, reach out to others on the list, and see if you can create a group. 

Attachments: Issue 2 (February 1)

2/2/25

No email. (I blame United wifi... It stinks)
2/3/25
We started the class by completing a big picture perspective on discounted cash flow models, noting that while the way we get  cash flows, growth rates and discount rates will vary, they are not only tied together with the same principles but require internal consistency. We started then with a discussion of risk and how it plays out in discount rates, before embarking on an assessment of riskfree rates, and with a discussion on whether the Fed sets rates and how to get riskfree rates in currencies where the government has default risk. I did mention, in passing, the possibility of negative riskfree rates and I do have a post on that:
http://aswathdamodaran.blogspot.com/2016/03/negative-interest-rates-unreal.html 
If you want to see my updated perspective on risk free rates, try my blog post from this week::
https://aswathdamodaran.blogspot.com/2025/01/data-update-4-for-2025-interest-rates.html
Some of this post covers what we will do next week in class, but it is still a good big picture perspective.  Also, the post class test and solution for today are attached. 

Attachments: Post-class test and solution
2/4/25
In this week’s valuation of the week, I am focusing on Nvidia, a company that I have the most selfish of reasons to value, which is that I have owned shares in it since 2018, and have been a beneficiary of the AI boom. I would start with this post from 2023, just as the AI boom was taking form, where I grappled with the AI market, as seen then.
https://aswathdamodaran.blogspot.com/2023/06/ais-winners-losers-and-wannabes-nvidia.html
I would then move on to my 2024 post on the Nvidia valuation, where I try to value the AI story, and explain why, even though I found Nvidia to be overvalued,, after a bad earnings report:
https://aswathdamodaran.blogspot.com/2024/09/the-expectations-game-aftermath-of.html
You can follow this up with the post that I did on DeepSeek at the end of last week, where I look at how DeepSeek changes the AI story, and by extension the valuation of Nvidia:
https://aswathdamodaran.blogspot.com/2025/01/deepseek-crashes-ai-party-story-break.html
In the context of that post, I revalued Nvidia, and my updated valuation of the company is at the link below:
https://aswathdamodaran.blogspot.com/2025/01/deepseek-crashes-ai-party-story-break.html
Here is what I want you to focus on. There are many pieces to the Nvidia story, but I would like you to look at four of them:
1. AI chip market size: In my January 2025 valuation, I reassessed my total market size for AI chips to be $300 billion (down from $500 billion), because of how I see DeepSeek affecting the end game for AI. You are welcome to disagree, from believing that DeepSeek will devastate the AI market profitability (which will make the market for AI chips even smaller), that it will have no effect (leave the market at $500 billion) or even that it makes the market bigger (with a market size greater than $500 billion)
2. Nvidia Market Share of Chip Market: Nvidia currently has an 80% market share of the market, and over time, while competition will increase, it will remain a dominant player (with a 60% market share). You may believe that this assumption is too optimistic (giving them a share less than 60%) or too pessimistic (share >60%)
3. Nvidia’s operating margin: Nvidia has nosebleed profit margin - close to 80% gross margins and 70% operating margins. I have assumed that there are three forces that will bring margins down - increased competition, attempts by TSMC to claim a larger share o the spoils and pushback from its four biggest customers (all big tech companies), but that the target margin will stay at 60%, since it is a design company.
4. Nvidia’s cost of capital: I use Nvidia’s characteristics on risk, debt mix and operating risk to arrive at a starting cost of capital of 11.79%, which I scaled down over time to a median cost of capital for US companies, You may be more optimistic than me about operating risk, and given them the median cost of capital (close to 8.5%) today.  
Change what you feel comfortable changing, using my spreadsheet, and then report your estimated value in the Google shared spreadsheet below:
https://docs.google.com/spreadsheets/d/1KgHLfJ-fkGMIA05UOQemoSAhZyD3MwhDfDQDFeQgMlY/edit?usp=sharing 
2/5/25
We started the class by completing the last loose ends on risk free rates, before turning our attention to equity risk premiums and what they purport to measures. We looked at historical risk premiums and their limits and then extended the discussion to estimate equity risk premiums for countries without much historical data. If you want to look at the historical returns on stocks, bills, bonds, real estate and gold in the United States, you can get the historical data at:
https://pages.stern.nyu.edu/~adamodar/pc/datasets/histretSP.xlsx 
We will come back talk about alternatives to historical risk premiums in the coming sessions.

If you are interested in seeing what the equity risk premiums look like, by country, take a look at the spreadsheet at the link below:
https://pages.stern.nyu.edu/~adamodar/pc/datasets/ctryprem.xlsx 
On the riskfree rate front, I have done many posts on why I think the Fed’s power to set interest rates is overrated. You may want to try these two:
  1. https://aswathdamodaran.blogspot.com/2013/06/the-fed-and-interest-rates-lessons-from.html 
  2. https://aswathdamodaran.blogspot.com/2024/09/fed-up-with-fed-talk-central-banks.html
Attached are the post class test and solution for today. Finally, I have also attached the spreadsheets with the latest sovereign CDS spreads and ratings to this email. Until next time!

Attachments: Post class test and solution
2/6/25
By now, you should have a company picked, and if so, you can start thinking about at least the first two pieces of your discount rate calculation, a risk free rate and an equity risk premium. 
  1. Company Choice: I know that I have asked you this multiple times, and if you have responded already, I apologize, but if you have not picked a company to value yet, please do, and if you have, enter your company into the master list for the class: https://docs.google.com/spreadsheets/d/1uX8W1Eu8f9B3dEVcUfJLkurMGbmb86IwcS9BFSvSPLc/edit?usp=sharing 
  2. Equity Risk Premiums: I went through my calculation of country risk premiums in class,  with implied equity risk premiums as a chaser. In case, you are truly bored over this long weekend, you can read an annual update paper that I write on equity risk premiums every year. I am still working on this year’s version, but you can download the 2024 version by going to the link below: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4751941
  3. Company ERP: If you get the breakdown of revenues for your company by country or region, you can complete the process of computing the ERP for your company. You are welcome to use my country ERP estimates ( https://www.stern.nyu.edu/~adamodar/pc/datasets/ctryprem.xlsx), as long as you understand the mechanics. 
  4. Lecture note typos: There were typos on pages 10 and 12 of your lecture notes that I wanted to fix, where the numbers were not in superscripts. The corrected version is attached.
Finally, if you are still groupless, let me know, and I will see if I can connect you with a group. For that to happen That is about it for today’s nag, but I will be posting valuation tools webcasts tomorrow, on riskfree rates and equity risk premiums. 
2/8/25
1. It is time for some news (not really), but this is the third newsletter for the class.

2. Company choice & groups: I was checking the valuation master sheet:
I notice that we are moving in the right direction, but it you have not picked a company, please do.  If you have already and have just not entered the company name (not symbol), please do that.

3. My data update posts: I have a verbosity problem, and my data update are long and often boring (not my intent, but it happens..) I did post my sixth data update for 2025, and if you want to get a quick review of both my corporate finance and valuation classes, the posts contain that review, with update data. My sixth update is particularly relevant to what we will be talking about in the class for the next two weeks, and if you can find the time (especially if Superbowl ads are boring) to read it, it would help:

Attachments: Issue 3 (February 8)
2/9/25
How’s the Super Bowl Party shaping up? While you enjoy yourself, you may want to think about valuation questions. For instance, how much would you pay, if you were a network, for the rights to carry the Super Bowl in perpetuity? (Think of the questions you have to address to do this valuation, starting with whether the football can outlast its CTE challenge and continuing on to whether technology will allow watchers to completely bypass ads…) And if you are a company built around subscribers, say Amazon Prime or Netflix, would you outbid the ad-driven networks because you will use the Super Bowl to sign up new subscribers? As for the ads, will any of them match to the crypto ads that starred Larry David and Matt Damon in the Super Bowl a couple of years ago? And what does the Taylor Swift presence add to the value of an NFL franchise (not just the Chiefs)?  Now that I have sowed those seeds that may prevent you from watch Patrick Mahomes throw the ball with his left hand while lying on his back (how does he do that?), a preview of he week to come...

This week, we will turn our attention tomorrow to implied equity risk premiums, a forward-looking and dynamic way to estimate equity risk premiums  and then to betas, and alternative to beta as a risk measure and regression betas. It would help if you are able to find a beta estimate for your company (from a service like Yahoo! Finance or a Bloomberg terminal, if you can find one) and bring it to class with you.