UESP
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“That’s a fascinating story you tell. So. You might be the Nerevarine. Means nothing, of course. Corprus victims have all sorts of delusions.”
The following head canon is not yet substantiated by any released mod and is subject to change.
History
The Dwemer originated from the Ehlnofey in Atmora where Hermaeus Mora (The Woodland Man) conferred an excessive amount of knowledge to them which may have stirred their racial nihilism. They had ties to the Giant Ehlnofey of Atmora.
Quote
Dwemer — literally, ‘the Deep, or Deep-Counseled or Secretive People’ — are the fabled lost Dwarven race whose ruins and splendid artifacts are scattered across Tamriel. Elves use the term ‘Dwemer,’ connoting variously ‘deep-delving,’ ‘profound,’ and ‘close-counseled’; Imperial usage is ‘Dwarven,’ derived in fable from the affectionate regard of the Giant races for their ‘little’ Dwemer friends.
— Savant (dialogue)
Quote
Perhaps, then, the “brilliant students” of the titanic Ehlnofey mentioned in the Anuad are the Dwarves, and that their giant masters gave them this sobriquet
— PGE1