Davies, a try-scoring star during the 1970s golden era for Welsh rugby, will be at Eden Park on Saturday when Wales meet World Cup semi-final opponents France.
And the former British and Irish Lions wing admits he has been enthused by a brand of rugby that is making Wales box-office entertainment in New Zealand.
"This is a young side that is eager, and they are playing some lovely rugby," Davies said.
"They are hugely competitive, a wonderful team playing rugby in every game."
Wales have arrived in the last-four after reeling off successive wins against Samoa, Namibia, Fiji and Ireland. It is already their best World Cup campaign since 1987.
Davies added: "What I like about them is that whereas in the past Welsh teams would have scored, say, 25-30 points against Namibia and Fiji, this team showed the difference and went on to score more than 80 and 60 points, respectively, against them.
"This is the best I've seen from a Welsh team playing well, and when they won the (Six Nations) Grand Slam in 2005 and 2008, this side has taken a step beyond that with the way they are playing.
"These players don't understand fear. They play some delightful rugby, and so far they have gone a stage further from anything that has been achieved in the past."
A significant part of Wales' World Cup success story has been the thrilling emergence of young players like George North, Toby Faletau, Dan Lydiate and skipper Sam Warburton.
"The youngsters have made a big impression on the team," Davies said.
"Perhaps if there has been a difference since the Grand Slams, then they are a more all-round team, they are terrific in their attitude and sound in defence. There doesn't seem to be a weak link.
"They score loads of tries and are starting to say 'why should we fear anyone the way we've played?'
"France may have a good record against Wales, but they haven't played this team yet.
"Let's not be shy, let's think back to the opening (World Cup) game they lost but should have won. If we can play like that against South Africa, we can do it against anyone."
Davies, the 2009 Lions manager and one of rugby's true statesmen, is also proud of the way Wales' World Cup squad have been accepted in New Zealand.
"They have got the respect of the people of New Zealand," he added. "Everyone is talking about Wales and how well they are playing.
"They have seen how this Welsh team have embraced the community and the nation. They respect the kind of rugby they have played.
"There is the odd chance that nice guys don't win, but I don't see why that should be the case."
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