“Do you know what the biggest intangible is? Future growth.” – Aswath Damodaran – Kerschner Family Chair in Finance Education, Professor of Finance at Stern School of Business of New York University
Equity markets today are dominated by businesses whose most important assets do not sit on a factory floor or appear cleanly on a balance sheet. Software platforms, artificial intelligence models, orbital networks, brands and ecosystems all promise cash flows that are mostly still to come, and investors routinely pay valuations that can only be justified if those promises materialise at scale.1,3,9 The analytical problem is not whether such businesses can have enormous value; it is how much of that value is grounded in demonstrable economics and how much is simply hope dressed up as narrative.
From factories to code: the rise of the invisible balance sheet
The transformation of corporate value over the past three decades is stark. In the 1980s and 1990s, the largest listed companies were dominated by capital-heavy sectors whose worth could be roughly proxied by tangible assets and established cash flows.1,6 Today, the top market capitalisations are technology and platform firms whose physical footprint is modest relative to their valuations, but whose market prices embed expectations about data, network effects, intellectual property and human capital.1,3,9 That shift has created what is sometimes called the invisible balance sheet: the pool of competitive advantages and capabilities that standard accounting either misclassifies as expenses or ignores altogether.10,19
Economic statistics bear this out. Studies tracking corporate investment show that spending on research and development, software, organisational capital, data and other non-physical capabilities has risen inexorably, often outpacing traditional capital expenditure.3,9,21 Top-quartile growth companies invest more than 2,6 times as much in such intangibles as low growers, evidence that the race for future profits now runs through ideas and code rather than steel and concrete.3,15 For investors, the question is not whether intangibles matter, but how to connect these outlays to future cash flows with enough discipline to avoid self-delusion.
Damodaran’s framing: value as existing assets plus growth assets
Aswath Damodaran’s valuation framework starts from a deceptively simple decomposition: the worth of a business is the value of cash flows from existing assets plus the value of growth assets, adjusted for risk and the time value of money.7,16,19 Existing assets are the businesses and projects already in place, producing observable revenues and margins. Growth assets are the projects the firm has not yet taken, the markets it has not yet entered, and the improvements in economics that investors expect but have not yet been realised. When market capitalisation exceeds the value of existing assets, the difference is what he labels the value of growth assets.16,19
In intrinsic valuation terms, if V is enterprise value, CF_{EA} the expected cash flows from existing assets, CF_{GA} the incremental cash flows from growth assets, WACC the weighted average cost of capital, and g the steady-state growth rate beyond a high-growth period, then the stylised structure is:
V = \sum_{t=1}^{T} \frac{CF_{EA,t}}{(1+WACC)^t} + \sum_{t=1}^{T} \frac{CF_{GA,t}}{(1+WACC)^t} + \frac{CF_{T+1}}{(WACC - g)(1+WACC)^T}The second term captures the economic payoff from future growth. In mature, low-growth firms this component is small; in young, high-growth or platform businesses it can be the dominant driver of value.7,16,19 When Damodaran refers to the biggest intangible, he is pointing to this wedge: the capitalised value of improvements and expansions that have not yet occurred but are assumed in the price.
Accounting blind spots: why future growth is hard to see
Standard financial reporting is poorly designed to capture this wedge. Research and development, software engineering, brand-building and training are typically expensed as incurred, reducing current earnings rather than being placed on the balance sheet as assets that generate benefits over multiple years.6,10,19 This treatment may be conservative from an accounting perspective, but it also means that the economic engine of future growth is pushed into the income statement noise rather than recorded as a stock of productive assets. As a result, conventional measures such as return on equity and profit margins can be systematically distorted for intangible-intensive businesses.10,13,19
Damodaran’s empirical work shows that capitalising certain categories of expenditure – for example, treating research and development as an asset with an amortisable life – can significantly alter reported profitability and capital efficiency.13,19 If a firm invests steadily in research with an assumed life of 5 or 10 years, the adjusted book value of equity and adjusted earnings both rise relative to reported figures, often yielding more meaningful estimates of return on invested capital. Yet even these adjustments only partially bridge the gap, because they rely on backward-looking spend data, whereas market prices embed forward-looking expectations about the productivity of future investments.13,16,19
Growth narratives and the “big market” temptation
SpaceX illustrates how the biggest intangible can dominate debate. In the run-up to its planned public listing, the company has been associated with valuations in the 1\,75 to 2 trillion US dollar range, numbers that dwarf the current revenues and cash flows of the business.5,8,11,26 Analysts decomposing these figures typically ascribe fragments of value to Starlink’s broadband business, to launch services, and to emerging lines such as orbital computing and artificial intelligence infrastructure.5,8,26 Sum-of-the-parts exercises might reach 1\,25 trillion US dollars in intrinsic value, leaving hundreds of billions as a residual priced in for future growth, scarcity premia and the allure of a founder associated with previous outlier successes.5,11
Corporate presentations add another layer by pointing to enormous total addressable markets. SpaceX materials have framed artificial intelligence as a 26\,5 trillion US dollar opportunity, connectivity as 1\,6 trillion and space as 370 billion, figures designed to signal that even modest market shares could justify lofty valuations.2,26 The tension Damodaran has explored in conversations about such cases is not whether these markets are large; it is whether investors are correctly distinguishing between “big market” and “big value”.1,17,20 Many companies can point to the same large pie, but only a few will capture durable, high-return slices.
From narrative to numbers: disciplining the growth intangible
Controlling for hype requires translating stories about the future into explicit, testable assumptions. Damodaran’s approach is to force every narrative about competitive advantage, business model or market expansion into three quantitative levers: revenue growth, operating margins and reinvestment.4,7,16 A claim that a firm will dominate a new market must show up as higher expected revenue growth (g_{rev}). Assertions about network effects or superior technology must translate into sustainably higher operating margins (m) or long-lived excess returns on capital. Ambitions for rapid expansion must be matched with a reinvestment rate (RR) that is compatible with funding constraints and cost of capital.
In a stylised framework, if Revenues_t grow at rate g_{rev} and the target operating margin is m, then operating income in year t is Revenues_t \times m. If the business needs to reinvest at rate RR to sustain that growth, the free cash flow to the firm (FCFF_t) becomes:
FCFF_t = Revenues_t \times m \times (1 - Tax) - RR \times Revenues_tThe “biggest intangible” is encoded in g_{rev}, m and RR for future years. Overly optimistic narratives will quietly assume implausibly high growth, ever-expanding margins, or unrealistically low reinvestment needs, yielding cash-flow paths that can justify almost any price. The discipline lies in benchmarking these parameters against the economics of the industry, the history of similar firms and the constraints imposed by competition and capital markets.4,7,16,19
When growth creates value – and when it destroys it
One of Damodaran’s more counterintuitive observations is that growth is not automatically valuable.7,16 A company that reinvests heavily at returns below its cost of capital (ROIC < WACC) destroys value with each additional dollar of expansion, even if reported revenues and earnings are rising. In such cases, the intangible of future growth is negative: the more the firm grows, the less it is worth. This is particularly relevant for companies that chase large markets at the cost of deep discounts, uneconomic customer acquisition and heavy capital intensity.
In contrast, growth becomes a powerful positive intangible when the firm can sustain returns above its cost of capital (ROIC > WACC) while scaling.7,16,19 Here, every additional unit of incremental capital deployed into high-return projects adds more to enterprise value than it costs. The challenge is empirical: investors must decide whether the business really has the competitive advantages – brand, technology, regulatory barriers, network effects – that allow such excess returns to persist, and for how long. Since many of these drivers are themselves intangible assets, the analytical loop tightens: future growth depends on the durability and monetisation of other intangibles.
SpaceX, AI and the “trillion-dollar gap”
Damodaran has described a “trillion-dollar gap” between his assessment of SpaceX’s intrinsic value and the prices rumoured or proposed in the marketplace.5,17,20 Part of that gap is a straightforward scarcity premium: a large, high-profile listing with limited initial float can trade at a temporary premium as investors scramble for exposure.5,14 But a significant portion is also the capitalised value of growth imagined in fields such as orbital computing, global connectivity and artificial intelligence platforms that leverage SpaceX’s infrastructure.2,5,26
The AI angle is instructive. The company’s pitch positions AI as a market segment measured in tens of trillions of dollars, with SpaceX and its affiliates claiming unique advantages in distributed compute and data.2,26 Investors extrapolating from the success of previous AI leaders may be tempted to assume that any credible player capturing even a small share of such vast markets will justify astronomical valuations. Damodaran counters that the relevant questions are narrower: what specific products and services will SpaceX sell, at what margins, with what reinvestment needs, under what competitive conditions?17,20 Once those are mapped into cash-flow forecasts, the space for justified growth value shrinks, even if it remains very large.
Debates and objections: are markets overpaying for growth?
Critics of the current environment argue that investors are systematically overpaying for future growth, particularly in sectors like AI, biotech and space, where uncertainty is extreme and feedback loops are slow.11,14,24 The worry is a replay of prior episodes – the dot-com bubble, the cleantech boom – in which vast sums were allocated based on narratives about transformative technologies and enormous addressable markets, only for capital to be destroyed when unit economics failed to justify the optimism. SpaceX’s eye-watering revenue multiples – sometimes cited near 96 times forward sales and over 200 times EBITDA – fuel this concern that the pendulum has swung too far towards growth as an unquestioned good.11,26
On the other side, proponents of high valuations point out that conventional metrics are backward-looking and that transformative platforms systematically look expensive before their economics mature.3,12,18 Many of the world’s most valuable technology firms spent years investing heavily in intangible assets, posting weak or negative accounting profits while building networks and capabilities that would later yield outsized cash flows.3,12 From this perspective, treating growth as the biggest intangible is simply a recognition that the market is paying for optionality in environments where a small probability of extreme success justifies seemingly aggressive prices.
Why future growth matters for capital allocation
Beneath the market debates lies a more fundamental consequence for corporate behaviour. When investors assign enormous value to future growth, boards and management teams face powerful incentives to prioritise expansion over current profitability. That can be beneficial when it encourages investment in innovation, infrastructure and experimentation that would otherwise be starved.3,12,18 However, it can also lead to overextension, empire-building and a tolerance for value-destructive projects so long as they feed the narrative of a boundless future.
Damodaran’s framework offers a partial antidote by downgrading growth that fails the excess-return test. If ROIC declines towards WACC as a business scales, the incremental value of further expansion falls, even if headline revenues are rising.7,16,19 Managers who understand this dynamic may rationally choose to slow growth, return cash to shareholders, or focus on improving the quality of existing operations rather than chasing every new market adjacent to their core. The discipline of treating future growth as an intangible that must earn its keep – not an automatic virtue – becomes central to long-term value creation.
Implications for investors in an intangible-heavy world
For investors, taking future growth seriously as the largest intangible reshapes analysis in several ways. First, it requires a move away from simple multiples towards explicit cash-flow modelling, however approximate. Multiples can still be useful as sanity checks, but they implicitly embed assumptions about growth and risk that are rarely unpacked.16,19 Second, it makes the study of intangible drivers – talent, culture, product architecture, data advantages, regulatory positioning – as important as understanding plant, property and equipment. Yet these drivers must always be channelled back into the hard numbers of growth, margins and reinvestment.
Third, it demands a more probabilistic mindset. When value is dominated by the payoff from uncertain future states, investors must think in terms of distributions rather than point forecasts. Conceptually, one can model enterprise value as an expected value over scenarios, V = \sum_i p_i V_i, where p_i is the probability of scenario i and V_i the intrinsic value in that state. The “biggest intangible” is then not a single number but a weighted bet across paths the business might take. Valuations such as those surrounding SpaceX suggest that the market is assigning fairly high probability to very optimistic scenarios; Damodaran’s more conservative estimates imply lower weights on those outcomes.5,17,20
Finally, the focus on future growth as the dominant intangible has macro implications. As more global wealth is concentrated in firms whose value rests on expectations about innovation, network effects and data, shocks to sentiment around growth can propagate quickly through markets and economies.9,21,24 Conversely, underinvestment in intangible assets can sap productivity and long-term growth at the country level. Policymakers concerned with economic complexity and competitiveness increasingly treat intangible investment – in education, research, digital infrastructure and institutions – as a key lever, mirroring the micro-level dynamics at the firm.9,21
A continuing tension between imagination and discipline
Future growth, treated as an intangible, sits at the intersection of imagination and discipline. It asks investors to picture businesses and markets that do not yet exist, while simultaneously constraining those visions within the bounds of economic logic and competitive dynamics. Damodaran’s work on SpaceX, AI and the broader intangible economy is an attempt to keep that balance: to acknowledge that vast value can reside in prospects not yet visible in cash flows, but to insist that those prospects be translated into explicit, testable assumptions about revenues, margins, reinvestment and risk.1,4,17,19
In a world where companies sell narratives as much as products, the largest component of valuation will often be the portion that cannot yet be audited, depreciated or insured. Whether that component proves durable value or transient illusion depends on how rigorously both managers and investors interrogate the stories they tell themselves about the future.
References
1. Aswath Damodaran on SpaceX, AI and the Big Market Delusion – 2026-06-18 – https://www.youtube.com/watch?v=vWx3kQuBHzE
2. Intangibles now represent a greater share of value at companies – 2023-10-07 – https://www.tradingview.com/news/moneycontrol:a03268113094b:0-intangibles-now-represent-a-greater-share-of-value-at-companies-aswath-damodaran/
3. SpaceX’s IPO charts reveal a company spending like an AI giant – 2026-05-24 – https://finance.yahoo.com/markets/article/spacexs-ipo-charts-reveal-a-company-spending-like-an-ai-giant-chart-of-the-day-120213160.html
4. Getting tangible about intangibles: The future of growth … – McKinsey – 2021-06-16 – https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/getting-tangible-about-intangibles-the-future-of-growth-and-productivity
5. Invisible, but Invaluable: Valuing Intangibles – The Birkenstock IPO – 2023-10-06 – https://www.youtube.com/watch?v=7vIsyP9pROM
6. SpaceX IPO Price and Stock Forecast of Reversion to Fundamentals – 2026-04-01 – https://futuresearch.ai/spacex-ipo-valuation/
7. Intangible asset – Wikipedia – 2003-08-18 – https://en.wikipedia.org/wiki/Intangible_asset
8. Session 3B: Valuing Intangible Assets, Control and Young Companies – 2022-07-26 – https://www.youtube.com/watch?v=landwqMR3AA
9. SpaceX Brand Valuation – The $91 Billion Brand Portfolio – 2026-05-25 – https://corebrand.ai/reports/spacex-brand-valuation
10. The Value of Intangible Assets of Corporations Worldwide … – WIPO – 2025-02-28 – https://www.wipo.int/en/web/global-innovation-index/w/blogs/2025/the-value-of-intangible-assets-of-corporations
11. The Benefits of Measuring Intangible Assets – 2019-09-26 – https://www.conference-board.org/research/global-economy-briefs/Measuring-Intangible-Assets-Benefits
12. Jan Viebig’s Post – LinkedIn – 2026-06-11 – https://www.linkedin.com/posts/jan-viebig-1b456b99_spacex-elonmusk-starlink-activity-7470842358423576576-xzd7
13. Investing in the Intangible Economy: FCF as the Answer | Pacer ETFs – 2020-01-07 – https://www.paceretfs.com/resources/resource-library/investing-in-the-intangible-economy-free-cash-flow-as-the-answer/
14. [PDF] VI. Valuing Companies with “intangible” assets – NYU Stern – https://people.stern.nyu.edu/adamodar/podcasts/valspr15/valsession15a.pdf
15. North Carolina Treasurer Shuns SpaceX on Valuation, Backs AI … – 2026-06-11 – https://action.alz.org/expert-time/North-Carolina-Treasurer-Shuns-SpaceX-on-Valuation-Backs-AI-Giants-OpenAI-and-Anthropic-34-245
16. The Intangible Assets Powering Tomorrow’s Growth – 2025-01-06 – https://www.crystalfunds.com/insights/intangible-assets-powering-tomorrows-growth
17. [PDF] VI. Valuing Companies with “intangible” assets – NYU Stern – https://pages.stern.nyu.edu/~adamodar/podcasts/valspr22/session17slides.pdf
18. Intangible Investments: what AI analysis can reveal – Alpha Architect – 2026-03-13 – https://alphaarchitect.com/intangible-investment/
19. [PDF] Valuing Companies with intangible assets – NYU Stern – https://pages.stern.nyu.edu/~adamodar/pdfiles/papers/intangibles.pdf
20. Aswath Damodaran on SpaceX, AI and the Big Market Delusion – 2026-06-19 – https://excessreturnspod.substack.com/p/the-trillion-dollar-gap-aswath-damodaran
21. Investment in intangible assets and economic complexity – https://www.sciencedirect.com/science/article/pii/S0048733324001823
22. Damodaran on Valuation – O’Reilly – https://www.oreilly.com/library/view/damodaran-on-valuation/9780471751212/9780471751212_intangible_assets_with_potential_future.html
23. Aswath Damodaran on SpaceX, AI and the Big Market Delusion – https://open.spotify.com/episode/1xrNJH7f3eCuRIwmmzIija
24. Investor Perspectives: Intangible Assets – 2025-03-26 – https://rpc.cfainstitute.org/research/surveys/2025/investor-perspectives-intangible-assets
25. Invisible Value? Valuing Companies with Intangible Assets – 2010-05-17 – https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1609799
26. Assessing SpaceX Finances, Addressable Market, and the AI Pitch … – 2026-06-03 – https://www.satellitetoday.com/finance/2026/06/03/assessing-spacex-finances-addressable-market-and-the-ai-pitch-ahead-of-ipo/
27. Are intangible assets being over-valued, or am I just going crazy? – 2012-11-29 – https://www.reddit.com/r/SecurityAnalysis/comments/13yxms/are_intangible_assets_being_overvalued_or_am_i/
28. Intangible Assets and Brand Value Impact On Cash Flows – LinkedIn – 2023-10-11 – https://www.linkedin.com/pulse/intangible-assets-brand-value-impact-cash-flows-katsimihas-cpa-ca-ok9ec
