Williams has been linked with a move away from the Welsh club after a series of assured displays at centre-back last season, with Arsenal and Liverpool among the clubs understood to be interested.
Swansea have slapped a £10million valuation on the 28-year-old and recently insisted they had received no approaches.
It is thought that the asking price may have put off potential suitors, but Davies believes he is one of the finest defenders in the league and would be worth every penny.
He said: "Last season I would say Ash was one of the best centre-halves in the Premier League, I cannot think of many who were better than him. The job he did was incredible.
"A price of £10million or more to sign him is completely justified.
"You see some of the money that gets spent in this league on players who are unproven in the Premier League. I think £10million is more than a fair price."
Swansea have bolstered their defence with a move for Jordi Amat from Espanyol, but Davies feels it is still vital to hold on to Williams.
He said: "You could see last season how good he was for us and he would be a massive loss.
"At the moment he is still a Swansea player and hopefully that will stay the same, but if he does leave for another club we will have to adapt quickly.
"We have Jordi Amat coming in as a new signing and hopefully he can be as good as, if not better than, him if it comes down to it."
Davies added: "Ash gave me a lot of confidence on the pitch and the transition from Swansea to playing for Wales was made a lot easier as I played with him every week.
"He is a great player and a great captain, he is always there to talk to, and if you have to say something he is happy to take it."