NEW YORK – Traders are bracing for a significant movement in Nvidia’s shares following the chipmaker’s earnings report on Wednesday. However, current expectations for volatility are more subdued compared to previous periods, according to U.S. options markets.
Nvidia’s options are currently set for an 8.7% swing in either direction by Friday, as per data from options analytics firm Trade Alert. This swing would translate to a market capitalization change of $200 billion, surpassing the market cap of approximately 90% of companies in the S&P 500. Despite this substantial potential movement, it is notably less than the 16.4% surge observed after Nvidia’s last quarterly earnings report. Furthermore, it is more conservative than the average 12% fluctuation traders have priced in over the past eight quarters.
Chris Murphy, co-head of derivative strategy at Susquehanna Financial Group, commented on the reduced volatility expectations, stating, “Volatility and expectations had been a fair amount higher the last time around.”
Bank of America (BofA) strategists project that Nvidia will contribute to 9% of the S&P 500 earnings growth over the next 12 months, a decrease from the 37% contribution observed over the past year. This projection underscores the pivotal role Nvidia has played in recent market dynamics, driven largely by its advancements and dominance in the AI and semiconductor sectors.
| Metric | Current Period | Previous Period |
|---|---|---|
| Implied Volatility (Swing) | 8.7% | 16.4% |
| Market Cap Swing | $200 billion | Larger than 90% of S&P 500 |
| Average Volatility (Last 8 Q) | 12% | – |
| Expected Earnings | $5.59 per share | – |
| Expected Revenue | $24.65 billion | $7.19 billion |
- Nvidia’s options indicate an 8.7% swing, translating to a $200 billion market cap change.
- This expected movement is less than the 16.4% jump seen after the last earnings report.
- Analysts predict Nvidia to drive 9% of S&P 500’s earnings growth in the next year.
Despite the lower volatility expectation, the upcoming earnings report is anticipated to significantly impact Nvidia’s share price. Matt Amberson, founder of options analytics service ORATS, highlighted that implied volatility for out-of-the-money calls is roughly equal to that of out-of-the-money puts. This parity suggests that options traders are not dismissing the potential for further upside, even considering Nvidia’s substantial year-to-date gains.
“Traders expect up moves to be as violent as down moves,” Amberson remarked, indicating a balanced outlook among market participants.
According to data from LSEG, Nvidia is expected to post earnings of $5.59 per share, with quarterly revenue projected to rise to $24.65 billion from $7.19 billion a year ago. These figures reflect the robust growth trajectory Nvidia has maintained, driven by its strategic positioning in the high-demand sectors of AI and advanced computing.
Steve Sosnick, chief strategist at Interactive Brokers, pointed out that a downturn in Nvidia’s stock could test investors’ confidence in the broader AI trade. He expressed concerns about the sustainability of the rally if Nvidia were to experience a significant sell-off.
“Yes, the rally has broadened out, but I’m not sure how sturdy it would be if Nvidia sold off hard,” Sosnick said. He emphasized the critical role Nvidia plays in the AI trade, suggesting that a decline in its stock could have ripple effects across the market.
“There is a lot riding on the AI trade,” Sosnick added, reflecting the heightened stakes associated with Nvidia’s performance and its influence on market sentiment.
As Nvidia prepares to release its earnings report, market participants are closely monitoring various factors that could influence the stock’s movement. The company’s advancements in AI technology and its dominant market position are key elements driving investor interest and expectations.
Furthermore, Nvidia’s strategic initiatives, including partnerships and innovations in semiconductor technology, continue to position it as a leader in the industry. The earnings report will provide critical insights into the company’s financial health and future prospects, shaping investor strategies and market dynamics in the coming months.
In summary, while the anticipated volatility for Nvidia’s shares is lower than previous periods, the earnings report remains a significant event for traders and investors. The outcome will not only affect Nvidia’s market valuation but also provide broader implications for the AI sector and overall market sentiment.
Key Metrics to Watch:
- Earnings per Share (EPS): Expected at $5.59
- Quarterly Revenue: Projected to increase to $24.65 billion
- Market Cap Swing: Estimated at $200 billion
- Implied Volatility: 8.7% swing
As Nvidia continues to navigate the dynamic landscape of technology and innovation, its performance will be closely scrutinized, with investors keen to gauge the company’s ability to sustain its growth and market leadership.
The forthcoming earnings report for Nvidia is a pivotal event, with traders pricing in substantial movements in the company’s stock. Although expectations for volatility are more tempered compared to past quarters, the implications of the report will be significant. Analysts and market participants will be watching closely to see how Nvidia’s performance aligns with projections and what it means for the broader market, particularly in the context of the ongoing AI trade.
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