Every few years, Wall Street meets a model that looks great on paper.

In 1987, it was “portfolio insurance,” a model that told big funds to sell automatically when prices fell. They all sold at once. The Dow lost 22.6% in a single day.

In 1998, it was a hedge fund run by two Nobel Prize winners whose math said they couldn’t lose. They lost $4.6 billion in four months.

In 2008, it was a formula that bet homeowners would default one at a time, like gentlemen. They defaulted like soccer fans.

Finally, in January 2025, it was Chinese and ran on a shoestring: DeepSeek. Its makers claimed they built world-class AI for pocket change. Investors did the math. If China could do this on the cheap, who needed a warehouse full of Nvidia chips?

Nvidia lost $589 billion in one day, the biggest one-day loss for any company in U.S. history. Then the panic passed. Cheaper AI meant more AI, and more AI meant more chips. (A Victorian economist named William Jevons could’ve told them that.)

Nvidia hit new highs. DeepSeek became a punchline.

Turns out, Wall Street feared the wrong Chinese model. The one that mattered had no parameters, no weights and no benchmark scores. 

Her name? Alice Huang, a former Chinese TV reporter turned tech executive.

Two Huangs Don’t Make a Right

Alice Huang was a managing director at Megaspeed, a Singapore data center company and one of Nvidia’s biggest buyers in Southeast Asia. 

U.S. intelligence believes she fed information to Beijing.

On Sunday, Jensen Huang—no relation—told his employees he had been "unfaithful" to his wife. Nvidia is down about 14% this month. That's roughly $700 billion in market value. 

DeepSeek Day cost less.

Black Swan, Red Swan 

We’ve seen this movie. 

DeepSeek scared everyone, the bears piled in, the dip buyers cleaned up and DeepSeek became a punching bag.

But this time, the bird is a different color. 

This red swan left a paper trail—Bloomberg, a short seller and the New York Times all flagged signs of Nvidia chips leaking to China over the past year. Wall Street called it a duck.

Our colleague Davis Wilson is our long-time resident Nvidia bull. 

He’s holding.

“Nvidia’s stock is collapsing while Wall Street’s expectations for the business continue moving higher,” he wrote this week. By his numbers, analysts now expect Nvidia to earn $15.93 a share next year, up from $12.84 ninety days ago. At around $170, the stock trades near 10.5 times that.

Davis has one worry, and it’s in Washington: “The affair won’t hurt Nvidia’s earnings. But further restricting Nvidia’s access across key Asian markets could.”

Earnings can answer the demand question. But they can’t answer the Washington one.

The Exit is Up 

The DeepSeek bears made a bet against demand. Demand won. We’re betting it will keep winning. 

The real risk: Nvidia can sell every chip it makes. Washington decides who gets them. Engineering problems get solved. Political problems rear their ugly heads every election. 

So where does the AI trade go when politics holds the keys?

Up.

Voters can pause a data center in Virginia. A county board can kill one in Ohio. Low Earth orbit has no county board. It doesn’t even have a zip code.

Elon’s plan is up to 1 million AI satellites, running on sunlight, hundreds of miles above the nearest zoning meeting. SpaceX filed the paperwork this January. 

The rockets belong to SpaceX. The chips, for now, belong to Nvidia. Both are betting the AI trade’s future is up. So am I.

Politicians write the rules. Engineers find the exits.