Options markets are pricing a $355 billion swing in Nvidia's market value when the company reports first-quarter earnings Wednesday, but the implied volatility tells a more interesting story than the raw number. The chipmaker's options imply a 6.5% move in either direction Thursday, translating to roughly $350 billion in market capitalization. That is more than the individual market value of about 90% of S&P 500 constituents, according to Reuters.
Yet the 6.5% implied swing is actually below Nvidia's historical average post-earnings move of 7.6%, data from analytics firm Option Research & Technology Services (ORATS) shows. It is, however, higher than the 5.6% move priced ahead of the company's February report.
"I think investors have become complacent about AI/capex," said Matt Amberson, founder of ORATS.
Not all traders are playing it safe. A notable Monday trade saw the purchase of a 25,000 call spread expiring June 1 for $1.78, betting Nvidia could rise roughly 16% to $260 per share in the next two weeks. The potential payoff is more than seven times the initial cost, according to Chris Murphy, co-head of derivatives strategy at Susquehanna.
Murphy said the chipmaker's options skew has shifted toward calls, signaling growing demand for upside exposure rather than just downside protection. "The market is no longer simply paying up for downside protection.
It is increasingly paying for upside participation," Murphy said, noting that bets on rising tech stock prices went from a five-year low in March to a five-year high by mid-May.
Nvidia shares have gained 19% this year, while the S&P 500 is up 8% and the Philadelphia SE Semiconductor Index has surged 57% over the same period. The earnings report arrives with bond yields at 52-week highs. The 30-year Treasury yield hit 5.197% and the 10-year reached 4.687% on Tuesday, pressuring tech stocks. The Nasdaq Composite fell 0.8% to 25,870, and Nvidia closed down 0.8% ahead of its own report, per Kiplinger.
"Nvidia will help set the tone for a stock market that is in need of its next catalyst after an incredible run since the March lows," said Paul Stanley, chief investment officer at Granite Bay Wealth Management.
Gabelli Funds portfolio manager John Belton expects Nvidia to beat estimates again, calling the report "amazingly boring as usual." Belton's thesis: Nvidia remains the main beneficiary of a massive AI capex spending boom with a trillion-dollar order book extending through 2027. He's watching for a broadening customer base beyond the five mega-cap tech companies that currently drive half the business. The stakes are enormous. Nvidia closed Monday at $222.32 with a market cap of $5.402 trillion.
Questar Capital Partners CIO Richard Reyle called the earnings event "the ultimate test for a stock market that is not only trading at record highs, but one that also had a breathtaking bounce off the March lows."
Hedge funds were net sellers of Nvidia stock in Q1, reducing ownership by 126.6 million shares. But 402 funds increased their stakes while 363 trimmed positions, suggesting the selling was concentrated among a subset of managers rather than a broad retreat.
Nvidia reports after the closing bell Wednesday, with the conference call scheduled for 5 p.m. EST.
