Here's why:
* Smaug's arrogance: He's a powerful dragon who has lived for centuries, accustomed to being feared and respected. He doesn't consider the possibility of a hobbit, even one who possesses the One Ring, being a threat to his power.
* Smaug's lack of understanding: Smaug doesn't grasp the concept of a hobbit having the courage and determination to seek revenge. He perceives them as weak and insignificant creatures.
* The contrast between their sizes: The sheer size difference between Smaug and Bilbo makes the idea of revenge ludicrous. Smaug would see Bilbo as an ant trying to fight an elephant.
Smaug's laughter highlights his arrogant and dismissive nature, underestimating the potential of the hobbit who stands before him. It also foreshadows the danger of assuming someone's power based on their appearance. Bilbo's courage and wit, combined with the power of the One Ring, will ultimately prove Smaug wrong.