By Nvidia’s double-digit decline could be just a taste of what’s to come for investors, with another pullback multiple times as large in the cards, “Black Swan” author Nassim Taleb said.
Taleb, an advisorr at hedge fund Universa Investments, cautioned that Nvidia’s rout, which wiped out almost $600 billion from the chip giant’s market cap, could be followed by further large declines in the stock.
“That’s absolutely in line with what you can expect. I mean, think about it. Something goes from 1 to 10, goes back to 9, people freak out,” Taleb said, speaking to Bloomberg on Tuesday.
Amid a broader sell-off fueled by DeepSeek on Monday, Nvidia stock shed 17% and erased $589 billion from its market cap for the worst-ever single-day loss of value in history. The total market loss exceeded $1 trillion at the end of Monday’s session.
But that decline is relatively minor considering the stock’s meteoric rise in recent years, Taleb said, characterizing Monday’s sell-off as “just a small setback.”
“You’re building everything on the hope that people will use your chip, will use chips, and the investment will not come from software or someone figuring out a better idea or some other method, which is what happened. It’s a hint of what is to come,” Taleb told Bloomberg.
Nvidia’s pullback illustrated how fragile markets are, Taleb said. He pointed to how heavily investors were concentrated in a small corner of the market; Nvidia, Apple, Amazon, Alphabet, and Broadcom accounted for nearly half of all gains in the S&P 500 in 2024, according to an analysis from Goldman Sachs.
People also tend to underestimate how volatile tech stocks can be in a single trading day, Taleb said, referring to stocks in the sector as “gray swans.”
“This is the beginning,” Taleb added. “Beginning of an adjustment of people to reality, because now they realize, now, it’s no longer flawless. You have a small little chip on the glass. Now they realize, oh, it’s not infallible. Maybe I should revise.”
DeepSeek, the Chinese startup whose AI model rivals US peers despite being trained with older generation chip tech, has fueled concerns over the artificial intelligence trade in the US. In particular, the sell-off revealed concerns over two key risks that investors have mostly overlooked until now — stretched valuations and heavy AI spending by large-cap US tech firms.
Mark Spitznagel, the chief investment officer of Universa Investments, the hedge fund Taleb advises, has compared the run-up in tech stocks in recent years to the dot-com bubble, adding that the market now looks to be in the “greatest bubble in human history.”
