The author of the book "The Black Swan," Nassim Taleb, stated that the painful 17% sell-off NVIDIA experienced on Monday is just the beginning. Considering the risks in the Industry, NVIDIA's decline on Monday was actually quite small. People are starting to adapt to reality, and they now realize that it is no longer perfect.
The author of the book "The Black Swan", Nassim Taleb, warned in a recent conversation with Bloomberg that investors blindly chasing the AI craze on Wall Street are at risk. On Monday,$NVIDIA (NVDA.US)$the painful 17% sell-off encountered is just the beginning, and the future pullback could be double or even triple the 17% decline.
This is just the beginning, as people start adapting to reality. They now realize that it is no longer flawless—a small crack has appeared in the Glass.
So far, investors have been too focused on a single narrative: that NVIDIA maintains its dominance in the AI field, and the company's stock price will continue to rise. However, considering the Industry risks, the decline of NVIDIA on Monday was actually very small.
NVIDIA's plunge on Monday wiped out $589 billion from its Market Cap, marking the largest in the history of the US stock market. On Tuesday, NVIDIA rebounded significantly during the day.
Taleb is known for his bestseller "The Black Swan," which explores the extreme impact of rare and unpredictable events. He currently serves as a scientific advisor at Universa Investments, a fund focused on tail risk hedging that offers Insurance-like strategies to help investors protect their portfolios from severe market fluctuations.
Taleb was previously an Options Trading trader, known in the industry for his pessimistic predictions. However, his predictions do not always come true. For example, at the beginning of 2023, he warned many investors that they were not prepared for a high-interest rate era and that Assets may not inflate as wildly. But since then, fueled by the AI investment frenzy, US stocks have soared significantly.
However, Taleb and Universa Investments do not advocate for investors to completely exit the market, thereby missing potential gains, but rather suggest allocating a portion of assets in the portfolio to guard against sudden shocks.
Taleb stated that too many investors blindly drive up the stock prices of AI-related companies, while they do not actually understand how this technology works or how to succeed. He described Technology companies as "gray swans" because the market often underestimates the enormous intraday volatility that these Stocks can experience.
Taleb also emphasized again his concerns about the unsustainability of the USA's debt. He warned that if labor costs rise combined with aggressive tariff policies, it could trigger an 'inflation explosion', and he believes that considering this risk, the Bonds market is not a wise investment symbol.
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