Black Swan author Nassim Taleb stated that the crash in Nvidia shares reflects the fragility of the equity market and that more losses are expected ahead.
A slump of two or three times bigger than Monday's 17% sell-off that wiped $589 billion from Nvidia's valuation is “absolutely in line” with what the market must expect, Taleb said while speaking to Bloomberg on the sidelines of Miami Hedge Fund Week.
Monday's sell-off just highlights what's in store for investors who have invested heavily in Wall Street's AI stocks.
“The 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," Taleb said.
The sell-off was triggered by the rise of the Chinese AI app DeepSeek, which raised fears that the US tech giants may not dominate the artificial intelligence industry as expected.
Investors considered this a threat to both demand and reliance on Nvidia's advanced chips. According to Taleb, investors were only focused on one narrative that the shares would go up till Nvidia maintained dominance in AI. With the risks involved in the industry, Monday's sell-off was “very little”.
Who is Nassib Taleb?
Taleb is also a scientific adviser to Universa Investments, a tail-risk hedge fund, which effectively offers a form of insurance to help protect portfolios from violent market events.
He is also known for his gloomy pronouncements of markets, which have not been accurate in some cases. In 2023, he said many investors were not prepared for higher interest rates when assets may no longer be “inflating like crazy.” The benchmark US equity gauge is up almost 50% since, mainly due to AI stocks, Bloomberg reported.
Taleb advocated that investors have a portfolio that protects them from unexpected shocks while allowing them to enjoy sudden gains from the market as well.
According to him, several investors are investing in AI stocks without knowing the details of how they function. He called technology firms “gray swans” as investors are unable to determine the deviations in their prices that are possible in a day.
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