Nvidia Selloff: Black Swan Author Nassim Taleb Says DeepSeek-Fueled Rout 'Is the Beginning'

The discussion centers on the recent market sell-off, particularly focusing on Nvidia's 17% drop, which is framed as a minor setback given its substantial prior gains. The conversation explores the risks inherent in overreliance on singular market narratives, such as AI dominance by Nvidia, drawing parallels to historical technology shifts like AltaVista's displacement by Google. The dialogue highlights the fragility of market structures and wealth formation, noting that significant fluctuations are typical in technology sectors. It suggests that investors are beginning to reassess their assumptions about the infallibility of tech stocks amid such volatility.

• Discussion on the recent market sell-off, specifically focusing on Nvidia's stock performance.
• Nvidia experienced a significant increase in stock value, which makes the recent 17% drop appear as a minor setback rather than a large sell-off.
• The conversation explores market structure and overcrowding as potential reasons for the sharp sell-off.
• The psychological aspect of market behavior is highlighted, where declines are more noticeable than rises.

"Nvidia lost. What do you mean large? Nvidia? Nvidia went up from something like 12, 13, 14, 18. All right. Went up an order of magnitude. So giving back 17% is not large, just a small setback."

• The quote emphasizes the perspective that Nvidia's recent stock decline is minor compared to the substantial growth it has experienced over time.

"Everybody's focused on the same story and people notice the falls more than the rises."

• This quote highlights the tendency of market participants to pay more attention to declines, which may contribute to the perception of a sharp sell-off.

"They find it natural that the things the story was with work, Nvidia would keep rising and a natural one. It pulls back a little bit."

• The quote reflects the expectation that Nvidia's stock would continue to rise, and a minor pullback is seen as a normal market correction.

• Discussion on the inherent risks involved in the industry where Nvidia operates.
• Emphasizes the dependency on the adoption and use of technology, such as chips and relationships, for continued growth.
• Highlights the uncertainty of investments, especially with potential competition from software advancements.

"Very little considering the risks involved in such an industry. You're building everything on the hope that people will use your trip, will use trips, relationships, and that the investment will not come from software or someone figuring out a b."

• The quote underscores the significant risks associated with Nvidia's industry, including reliance on technology adoption and the threat of emerging competitors.

• The discussion highlights the potential pitfalls of overrelying on a single company, like Nvidia, to dominate the AI market.
• History suggests that innovators often do not reap the financial benefits of their technological breakthroughs.
• The example of Sir Clive Osborne, who invented the first laptop but went bankrupt, illustrates the unpredictability of technological markets.

"The one who came up with the first laptop computer, Sir Clive Osborne went bankrupt."

• This quote emphasizes the historical precedent that inventors or early innovators are not always the ones who profit from their inventions. It serves as a cautionary tale against assuming that current leaders in AI will maintain their dominance.

• The discussion suggests that the future of AI and its market leaders is uncertain and subject to change.
• There is an implication that while Nvidia is currently a leader, it may not remain so as the market evolves.
• The unpredictability of market dynamics is highlighted, suggesting the need for caution in investment and reliance on current leaders.

"Those who come up with a new technology, they think, Hey, you know what we figured out? This is going to be the future. We own the future. And sure enough, someone else will make the money."

• This quote underscores the theme of market unpredictability, cautioning against the assumption that current technological leaders will continue to be the primary beneficiaries in the future. It highlights the potential for other players to emerge and capitalize on the technology.

• The narrative around Nvidia's success is showing signs of fragility, despite past financial gains.
• Recent market adjustments are prompting investors to reassess their perceptions of Nvidia's infallibility.
• Historical parallels are drawn with past tech investments, suggesting potential shifts in market dominance.

"But now very clearly see that this story is very fragile. Even with the drawdown, people have still made a lot of money on Nvidia."

• This quote highlights the emerging fragility in the Nvidia success story, indicating that despite past profits, the situation is changing.

"Now you're going to get back a lot more. So this is the beginning."

• The speaker suggests that the current changes are just the start of a larger shift in how Nvidia is perceived by investors.

"Beginning of an adjustment of people to reality because now they realize now it's no longer flawless."

• This statement underscores a shift in investor mindset, acknowledging that Nvidia's trajectory is not without flaws.

• The speaker draws a comparison between current Nvidia investments and past investments in early Internet companies.
• AltaVista is used as an example of a once-prominent company that was later overtaken by Google, implying potential shifts in tech dominance.

"If you were in 1999, in 1998-99, trying to invest in the future of the Internet, you would have invested in AltaVista. And then Google came out of nowhere and displaced AltaVista."

• This quote serves as a cautionary tale, suggesting that current tech leaders like Nvidia could be displaced by unforeseen competitors, similar to past tech market shifts.

• The discussion introduces the concept of "grey swan" events in technology, which are significant but not entirely unpredictable.
• There is an implication that people tend to underestimate the impact of these events on technology companies.

"Do you think the deep seed moment for Nvidia is grey swan or even a black swan?"

• This question raises the idea of categorizing Nvidia's current challenges as a "grey swan" event, suggesting it's significant but not completely unexpected.

"All of technology is a grey swan except that they have people underesti-"

• The incomplete thought hints at the tendency of people to underestimate the impact and frequency of grey swan events in the tech industry.

• Market volatility can exhibit significant deviations within a single day, with fluctuations as large as 17% not being unusual.
• Such volatility highlights the fragility of market structures, particularly when influenced by a small number of stocks.
• The possibility of experiencing another drawdown, potentially much larger, is aligned with statistical expectations.
• Wealth formation in the market is significantly influenced by recent capitalization, indicating the fragility of the economic structure.

"Think about it. Something goes from 1 to 10, goes back to nine people freak out. Right."

• This quote illustrates how rapid changes in market values can cause panic among investors, reflecting the inherent volatility and psychological impacts of market fluctuations.

"Does it show the fragility of market structure? It shows fragility of the worst formation based on a very small number of stocks causing it."

• The quote emphasizes how the market's fragility is often due to over-reliance on a limited number of stocks, which can lead to disproportionate effects on the overall market stability.

"And how much of wealth formation came from individual 3 trillion capitalization? Well, a lot of it is recent."

• This quote highlights that a significant portion of wealth formation is derived from recent market capitalizations, underscoring the fragility and potential volatility of the current economic structure.