I’ve been doing this — and on most days, I’m not even sure what “this” actually is — for a long time. A bit longer still if you count the incarnation before this one. And for the entirety of my adult life if all “this” is is musing about, and dabbling in, financial assets.
One of the few things I can say with certainty about investing is that it isn’t hard. The best way to accumulate wealth with stocks is dollar-cost averaging in ultra-low-fee, passive mutual funds or exchange-traded, index-tracking products. Or dollar-costing averaging in shares of blue-chip companies. Dividends everywhere and always reinvested, or at least until you retire, big dips everywhere and always bought unless you can’t afford to spare the money.
No, you don’t need to pay anyone to execute that strategy, and yes, you do have time to execute on it, no matter how busy you are. If you’re patient, vaguely intelligent and willing to keep yourself a modicum of apprised when it comes to what’s going on in the macro-market sphere, you’ll have no trouble building wealth in publicly-traded equities over a long horizon. Paying someone to do that for you is a waste of money. Full stop.
On this matter (and a lot of other matters besides), I don’t care to listen to contrary opinions, because what I’ve just said is about as close to a statement of fact as non-deterministic statements get. I realize many of you are in the professional money management business and thereby might find my assessment grating, to which I’d reply, “I’m so not sorry.”
I woke up Tuesday morning to a predictable hodgepodge of mainstream financial media articles and social media derision documenting the alleged gullibility and irredeemable recklessness of “retail investors” (and never let it be lost on you that 99 out of 100 people deriding retail investors online are themselves retail investors) for buying the dip in Nvidia and tech more broadly during Monday’s DeepSeek rout.
I didn’t hear any apologies four hours later when Nvidia was up 7% and the Nasdaq 100 2%, but I’ll hear plenty of the same derision tomorrow in the event tech and Nvidia are lower again, or should mega-cap earnings disappoint, adding fuel to Monday’s fire.
I used to traffic in cheap retail investor humor (bad bag-holder jokes), but I stopped a long time ago because it’s disingenuous and ignores the fact that a simple, disciplined dollar-cost averaging strategy like the one mentioned above, supercharged with opportunistic dip-buying, would be up stupendously since late 2008. I know because I’ve been executing on precisely that with about 15-20% of my total assets for as long as I can remember. (If you haven’t read “Where Were You When The World Didn’t End?” I recommend it. It was an early precursor to the Monthly Letters.)
Bottom line: If you’re laughing at “retail investors” for buying dips like Monday’s, the joke’s on you. Twice. First because you’re a retail investor too, whether you realize it or not. (If you weren’t, you’d know it.) Second, because the only thing funny about dollar-cost averaging and dip-buying in blue-chips and particularly in indexes comprised of blue-chips (i.e., stripping out some of the idiosyncratic risk) is the comical scope of the gains that’ll accrue to the disciplined over time.
So, there’s that. I felt compelled to put it out there Tuesday given the decibel level of the dip-buying derision, as though there’s something inherently wrong with putting money to work in a pullback. Could the semi selloff get worse? Well, sure. Of course it could. But that’s (almost) beside the point, unless you think it’s possible to reliably call tops and bottoms (it’s not).
Coming quickly back to the issue at hand — the Chinese black swan — if you ask Bridgewater, DeepSeek’s apparent breakthrough isn’t bad news over the longer haul, but Nvidia could fall further in the near-term because “DeepSeek’s success may encourage companies to invest more in achieving efficiency gains by optimizing how AI software interacts with the hardware.” For his part, Nassim Taleb told Bloomberg that Monday may be “just the beginning of an adjustment to reality.” “You have a small little chip on the glass,” he said.
Profound stuff, right?! That’s the kind of insight you can buy for tens of millions of dollars in management fees (to Bridgewater) and consulting dues (to people like Taleb).
Less expensive names weighed in too. “Nvidia has been the number one driver of S&P 500 earnings growth over the past 18 months,” JonesTrading’s Mike O’Rourke remarked, warning that “if Nvidia does not deliver on earnings growth, an expensive S&P 500 becomes much more expensive.”
“While it is clearer than ever that the age of AI is coming, it is also increasingly clear that the long fashionable concepts of ‘moats,’ as applied by fund managers to individual companies, looks ever more precarious, if not redundant, in the AI world given the monumental scope for disruption,” said Christopher Wood, of Jefferies’ Greed & Fear fame. “This is highly relevant given the massive market capitalizations represented by big-tech at a time when these companies have in practice been converging on the same AI area to compete with each other,” he added. “It seems unlikely in the extreme that all the currently dominant incumbents will prevail in the new world order which emerges.”
For their part, Rabobank wondered aloud if DeepSeek’s a deep fake. “A number of analysts have already suggested the claimed costs for training the model are likely bogus, and that it is very likely that DeepSeek has in fact relied on US chips that it wasn’t supposed to have and may not be able to access in the future,” the bank wrote. “So, China’s ‘AI Sputnik’ may actually be an AI Potemkin Village, but the potential involvement of even outdated American chips in developing the system [points to] more tightening of export controls and knowledge transfer will be in the offing.”
Oh, and in the same note, Rabobank stated the obvious. DeepSeek’s “funneling chat prompts and user details back to Chinese servers,” and the data will probably “be perused by the Chinese government.” That, in turn, may suggest that if it’s going to operate outside of China, DeepSeek could “be targeted with ‘divest or die’-type orders” à la TikTok.
The tech/AI community has known about DeepSeek, and been downloading, testing, and using its models, in some case for some months. The investment community has, for the most part, paid attention to DeepSeek for days or weeks. I am watching the former’s assessment more closely than the latter’s. So far, the tech/AI community seems to say DS is the real deal.
I am reading about companies using DS’ models, running on their own infrastructure or in hyperscaler clouds (GOOG now, AMZN coming), for considerably lower cost than OpenAI’s (one case I read about, 2/3rd cost saving). While the headlines have been on the purportedly super-cheap training cost, DS implemented many techniques to also make inference more efficient.
My impression is that the potential for disruption is real. Probably not by DS, but by other model makers (including in the US) who build on DS’ methods to produce better and more compute/energy-efficient models than DS has today, without the CCCP connection.
How this may affect NVDA is unclear, to me. More efficient AI training and inference could be offset by more AI usage. Is NVDA the optimal architecture for inference? That’s an increasingly pertinent question.
JL – at a minimum it suggests that Nvdia’s margins will fall.
Jensen Huang is no moron. He’s been seeing the writing on the wall for a while – claiming that his ultra-costly chips are the best for inference which is probably dubious. He’s also been pushing the idea of an AI PC which he hopes everyone will feel they need for posting and sharing kitten videos and adorable photos of their granddaughter’s first day at kindegarten. Mmmm… that might challenge Apples higher end PCs?
More interesting I saw a headline on Digitimes (Taiwan) a while back about TSMC reducing orders for a key input of chip productoin. I was surprised that they acknowledged that it was at the behest of Nvidia, suggesting that Huang might be seeing a drop in new orders?
Qualcomm already makes an Apple desktop chip competitor that is quite compelling. Same low power/high battery life, nearly as robust in available cores, and an included Neural Processing Unit in the SoC. This makes Windows machines able to replicate what makes so many purchase a Macbook Pro. Nvidia entering the market with a high dollar version will only attract tech fanboys and people with too much money. Or they’ll end up being the next Sun, thousands for a PC that can barely outpace cheaper competitors.
Came here to ask this. Why can’t the hyperscalers use DeepSeek on their trillion dollar platforms and create skynet sooner. seems like they are going to try. Thx for sharing JL
Good point. The money spent is a sunk cost. Best to get some kind of return from it.
I’m also willing to bet a large Porterhouse steak that Jensen Huang and his buddies personally know every one of the DS “gurus” and all their previous work. The big boys are spending needless billions to avoid the opportunity cost of Type 2 errors and they are stealing the training data from us, the great unwashed, wherefrom we get paid what the little boy shot at … nothin’
Fantastic post. Next best thing to “buying the dip”, is having the resolve to hold through extreme, downward volatility.
Thanks, H.
Also in today’s headlines:
President Trump is preparing to place tariffs beyond Chinese assembled electronics to computer chips made in Taiwan, warning the tariffs could reach as high as 100%.
“In particular, in the very near future, we’re going to be placing tariffs on foreign production of computer chips, semiconductors and pharmaceuticals to return production of these essential goods to the United States,” Trump said in a speech to Republicans on Monday.
“They left us and went to Taiwan,” he then said in an apparent reference to how many of the leading US tech companies have been sourcing their processors from Taiwan’s TSMC, a top semiconductor manufacturer. TSMC has established a factory in Arizona, but much of its chip production remains in Taiwan, where it’s been serving clients including Apple, Nvidia, Qualcomm and AMD, among others.
I am surprised how little attention the financial press is giving to this. I guess no one believes he will do it.
I think there is still a tendency to assume he’s posturing, but IMHO, the market is underestimating the risk of Trump 2.0. The disastrous rollout of federal funding freezes and attempts to get federal workers to resign en masse are just the start.
To be honest though, if I got offered full benefits and pay for the next 8 months, I’d take it. However, it’s a highly dubious offer knowing who’s making it and I’d hate to be left out of the cold if the package got pulled. Then again, I’m sure litigation would take a while to sort everything out so paid vacation wouldn’t be the worst thing in the world.
If so far is anything to go by, the midterms are going to be a Dem smorgasbord.
In the Netherlands the government did the same thing for the IRS. They considered the expenses too high and want to cut costs. They offered a generous severance to whoever would take it.
In the end, the talented employees take it and move to higher paid jobs in the private sector. The older employees and less talented ones stayed behind. 2 years later the tax services tried to go on a hiring spree because they didn’t have the required talent to still run the service, digitise processes and improve efficiency. They were unsuccesful and had to hire external contractors for 3-5x the price to get the show (somewhat) on the road again.
Trump has no clue how to run a business, let alone a government.
This was Uncle Elon’s playbook from when he took over Twitter as well. Fire ’em all and then scramble to lure them back.
The NYT had a few interviews with the common folk asking about their impressions of Trump’s first week and one of the responses (from a Jill Stein voter no less) was that Trump exhibits bold leadership by making decisions. It once again demonstrates that the average person has no idea what good leadership looks like and can’t spot terrible leadership when it’s right in front of their nose.
I think the storm of orders, threats, claims, promises, and actions is coming at such a high volume, so poorly thought out (halt all federal disbursements! except those ones! and those! not that!), often self-contradictory (order OPEC to cut prices! Stop all Russian oil! Produce all lithium domestically! No more EVs!), constantly changing (tariffs 60%! 2.5%! 10%! Tommorrow! April! Yesterday!), sometimes nonsensical (send the IRS’ 88,000 armed agents to secure the border!), that it is impossible to reposition portfolios for every new thing that he/his says.
By the time you think through the implications and knock-on effects of whatever the random word generator in the Oval Office said this morning and begin buying and selling positions, another word-barf gushes out and you’d have to reverse all those trades.
I’m not saying there’s not a general misdirection that all this is blowing in: there is. I’m saying the “process” is like a random walk in a high, foul wind.
On this particular “I’m gonna do ____”, obviously there is no volume alternative to Taiwan-made chips and China-made API in the near and even medium term, so they will continue coming into the US and the tariffs will just inflate COGS and price, while pressuring margin and volume.
With policy so inconstant, I don’t know that TSMC or Samsung will rush to commit another $30BN to more US fabs STAT!. Double-count and repackage existing spend to look like another $30BN, sure. And of course you can double the price of API and a pharma company’s gross margin might change by a few percent.
Constant chaos and reversals seems to suggest BTFD – wherever Agent Orange stirs the pot – to be a good investing strategy…at least short-term…until the chaos overwhelms..
I hope he does. It will restart inflation and add to his impending stupid death by 1000 cuts.
Why pay money managers when I can get advice from r/wallstreetbets for free? “Buy the f***** dip” is all we need to know.
FWIW as someone who’s been a software engineer / architect for over 25 years (and involved with various AI initiatives with the software company I currently work for), I don’t foresee the DeepSeek “phenomenon” as having a significant impact on the way most “tech” companies do business. I suppose some turbulence for companies like Nvidia was no surprise, but they were probably due for a correction regardless after the relentless run up. Regardless, what I do see is full steam ahead on all fronts AI and if anything I think DeepSeek will add more fuel to that fire to a greater degree than any potential negative impact (including the value of Nvidia chips).
IMB has been making open access to its patents for decades. They still make money and so do their customers. MAG7 is just a collection of greedy companies that take our money and run. A pox on all those guys.
IBM (sorry, I’m old)