Weekly "Focus" and a Black Swan Event

You may recall the term “a Black Swan event” to describe rare and unpredictable events with significant consequences. Author Nassim Nicholas Taleb rose to prominence with his 2007 book titled “The Black Swan: The Impact of the Highly Improbable”. Examples of Black Swan events include the 2008 great financial crisis, the Covid-19 Pandemic, and perhaps this week we may have just witnessed another such event with DeepSeek, a Chinese alternative to AI industry leader OpenAI. DeepSeek claims that it was able to develop its AI model at a fraction of the cost compared to its rivals. This announcement on Monday had a dramatic impact on the technology sector with Nvidia (NVDA) having the greatest ever one-day drop in market value for a single company, declining by approximately US$600 billion (i). There has been a flurry of commentary by analysts and big tech companies as to what this all means, but if true that AI can be provided at a much lower cost, this could accelerate the development of AI applications.

 

This week’s "Focus" from our economics team is attached.

 

Have a great weekend,

 

Brad

Senior Portfolio Manager and Senior Investment Advisor