- Nassim Taleb, who wrote the book The Black Swan, warned that markets should expect an even worse shock than the one that sank stocks after the release of DeepSeek’s AI technology.
Nassim Taleb, who wrote the book The Black Swan about unpredictable events, warned that Nvidia’s record stock collapse from fears over DeepSeek’s AI portends even worse market carnage to come and shows how fragile the economy has become.
His comments came just after Nvidia’s 17% dive erased $589 billion in market cap, representing the biggest-ever drop for a US company, which also dragged down the Nasdaq more than 3%.
That came after DeepSeek’s development of cutting-edge AI at a fraction of the cost that rivals like OpenAI and Google are spending raised doubts about the hundreds of billions of dollars that are slated for investment in the sector and elsewhere.
“This is the beginning,” Taleb told Bloomberg TV on Monday. “The beginning of an adjustment of people to reality.”
Since OpenAI released ChatGPT in November 2022, launching the current AI boom, Nvidia stock has soared more than 700% as demand for its chips have exploded. In the process, it has raised alarms that the overall stock market rally has grown too dependent on Nvidia and handful of other tech giants.
The history of tech innovations shows that the first mover doesn’t always emerge as the eventual winner, Taleb noted, pointing out how Google’s search engine displaced Alta Vista’s in the early years of the internet boom.
When asked if there could be another drawdown like Monday’s, he replied, “or much bigger, or two three times bigger even. That’s absolutely in line with what you can expect.”
The selloff also demonstrated the fragility of wealth formation from a very small number of stocks, and how much came from Nvidia alone, most of which was recent, Taleb said.
“It shows us how much the whole economic structure is fragile because of that,” he explained.
Taleb, who serves as distinguished scientific advisor at Mark Spitznagel’s Universa Investments, previously warned markets are more fragile than they have been at any point in the past 20 to 30 years.
In October, he said the environment was similar to what existed during previous collapses, pointing to complacency in the market and the earlier era of low rates that taught people to avoid conservative investments.
