Traders are bracing for a substantial market reaction to Nvidia’s (NVDA.O) first-quarter earnings, with options positions indicating a potential $355 billion swing in the chipmaker’s market value. Nvidia is a leading chipmaker, crucial for the artificial intelligence sector due to its advanced graphics processing units (GPUs). The market’s implied move of approximately 6.5% in either direction post-results on Thursday could translate into a roughly $350 billion shift in market capitalisation – a figure exceeding the individual value of about 90% of S&P 500 constituents.
While this implied volatility is higher than the 5.6% anticipated before its February earnings, it remains below Nvidia’s historical average price swing of 7.6%, according to analytics firm Option Research & Technology Services (ORATS). This suggests a more sanguine market outlook on the company’s earnings, even amid lingering concerns about AI capital expenditure sustainability. Matt Amberson, ORATS founder, observed that investors might have grown complacent.
Chris Murphy, co-head of derivatives strategy at Susquehanna, highlighted a shift in the chipmaker’s options skew towards calls, indicating increasing demand for upside exposure. One notable trade involved a call spread betting on a potential 16% rise for Nvidia. However, this bullishness is tempered by a noticeable increase in hedging and profit-taking across semiconductor stocks and related exchange-traded funds, suggesting investors are keen to protect gains after the sector’s sharp run-up.
This dynamic reflects the high investor expectations for Nvidia, positioning the semiconductor giant as pivotal to the AI trade. Investors will closely monitor signals on data centre demand, hyperscaler spending, margins, and forward guidance, all deemed critical for sustaining the AI-driven rally. Nvidia’s shares have climbed 19% this year, while the Philadelphia SE Semiconductor Index has surged 57% over the same period, underscoring the sector focus on these upcoming results.
