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Nvidia Profits Could Generate $200 Billion Share Swing, Options Show
NEW YORK (Reuters) – Traders are pricing in a big move for Nvidia shares after the chipmaker reported earnings on Wednesday, although volatility expectations are weaker than in the past, stock options markets show. USA.
Nvidia options are poised for an 8.7% swing in either direction through Friday, according to data from options analytics firm Trade Alert. That would translate into a market capitalization swing of $200 billion – larger than the market capitalization of about 90% of the companies in the S&P 500.
While huge by most measures, this implied move would fall far short of the 16.4% jump that Nvidia shares recorded following the company’s most recent quarterly earnings report. It’s also less aggressive than the 12% average move that traders have priced in over the past eight quarters.
“Volatility and expectations were quite a bit higher last time,” said Chris Murphy, co-head of derivatives strategy at Susquehanna Financial Group.
Nvidia, up about 87% this year, is seen as a leader in the burgeoning AI industry and has a market value of about $2.3 trillion, making it Wall Street’s third-largest company , behind Microsoft and Apple. Wall Street is betting on a surprise quarterly report from Nvidia.
Investor interest has extended to other AI-themed beneficiaries in recent months.
“The benefits of AI are extending to energy, raw materials and utilities,” BofA strategists including Gonzalo Asis wrote in a note on Monday. “It’s not just about NVDA anymore.”
BofA strategists expect the company to drive 9% of the S&P 500’s earnings growth over the next 12 months, compared with 37% over the past 12 months.
That’s not to say the next earnings report should be smooth sailing for the company’s share price.
Matt Amberson, founder of options analysis service ORATS, noted that the implied volatility of out-of-the-money call options is approximately the same as that of out-of-the-money put options. This suggests that options traders are not ruling out the possibility of further upside for stocks despite already robust year-to-date gains.
“Traders expect upward moves to be as violent as downward moves,” Amberson said.
Nvidia CEO Jensen Huang, left, with Dell CEO Michael Dell. (Bloomberg)
Nvidia is expected to report profit of $5.59 per share and a rise in quarterly revenue to $24.65 billion from $7.19 billion a year ago, according to LSEG data.
Steve Sosnick, chief strategist at Interactive Brokers, said a slowdown in Nvidia could test investors’ resolve toward the broader AI trade.
“Yes, the rally has broadened, but I’m not sure how robust it would be if Nvidia sold strong,” he said.
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“There’s a lot at stake in AI commerce,” Sosnick said.
(Reporting by Saqib Iqbal Ahmed; Editing by Ira Iosebashvili and Lincoln Feast.)