Traders Brace For Major Swing In Nvidia Stock Ahead Of Earnings Report: '...Expect Up Moves To Be As Violent As Down Moves'

Ahead of Nvidia’s NVDA upcoming earnings report, traders are gearing up for a significant shift in the company’s stock price.

What Happened: Traders are bracing for a significant shift in Nvidia shares following the company’s earnings report on Wednesday, Reuters reported on Tuesday.

Options markets in the U.S. indicate an expected 8.7% swing in Nvidia’s stock by Friday, as per data from Trade Alert. This move could equate to a market cap fluctuation of $200 billion, surpassing the market cap of about 90% of S&P 500 companies.

Despite this, the anticipated volatility is less than the 16.4% jump seen after Nvidia’s last quarterly earnings report and lower than the average 12% move priced over the past eight quarters.

“Volatility and expectations had been a fair amount higher the last time around,” said Chris Murphy, co-head of derivative strategy at Susquehanna Financial Group.

Nvidia, which has surged approximately 87% this year, is a key player in the AI industry with a market value of around $2.3 trillion. Wall Street is optimistic about a strong quarterly report from the company. Investor interest has also extended to other sectors benefiting from AI advancements.

BofA strategists, including Gonzalo Asis, noted that AI benefits are expanding to power, commodities, and utilities. They expect Nvidia to contribute 9% of the S&P 500 earnings growth over the next year, compared to 37% in the past year.

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Matt Amberson, founder of ORATS, highlighted that implied volatility for out-of-the-money calls and puts is roughly equal, indicating traders are not dismissing the potential for further stock gains.

“Traders expect up moves to be as violent as down moves,” Amberson stated.

Nvidia is projected to report earnings 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, mentioned that a downturn in Nvidia could challenge investor confidence in the broader AI market.

“There is a lot riding on the AI trade,” Sosnick said.

Why It Matters: Nvidia’s earnings report is highly anticipated, with analysts expecting strong results. Analysts predict Nvidia will report first-quarter revenue of $24.60 billion. This aligns closely with the LSEG data projections, underscoring the high expectations surrounding Nvidia’s performance.

Additionally, Nvidia has been a focal point for analysts, with some predicting a potential rally of around 30%. This optimism reflects the broader market sentiment that Nvidia’s advancements in AI technology could significantly impact its stock performance.

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