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Will Nvidia stock rise or fall after earnings? Options price $280b swing
Nvidia stock could see a $280 billion market value swing after earnings as options traders price a 5.4% move and investors watch AI demand.
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Nvidia investors are preparing for a major stock move after the company reports its second-quarter earnings on Wednesday afternoon. Options traders are pricing in a 5.4% move in Nvidia stock in either direction on Thursday.
That means Nvidia shares could rise or fall by around 5.4% after the earnings report. The expected move would change Nvidia’s market value by about $280 billion. Investors are closely watching the results because they want fresh clues about demand for AI chips and the strength of the wider technology sector, according to Reuters.
The expected move is smaller than in May
The 5.4% expected move is lower than the 6.5% move that options were pricing in before Nvidia’s May earnings report. This suggests traders are expecting less of a surprise from the latest earnings report.
Nvidia’s expected move is also below its historical average. Over the past 12 quarters, Nvidia stock has moved an average of 7.4% after earnings, according to analytics firm Option Research & Technology Services (ORATS).
Why traders expect a smaller reaction
Matt Amberson, founder of ORATS, said the smaller expected move shows that investors have become more comfortable with Nvidia, according to Reuters. He said the stock is becoming more predictable for the market.
Chris Murphy, co-head of derivatives strategy at Susquehanna, said Nvidia’s actual stock moves after earnings have often been smaller than what options traders had expected over the past two years. This has created a pattern where traders are no longer expecting extremely large surprises from Nvidia’s earnings.
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Nvidia may not see another huge earnings rally
Murphy said the early period of the AI boom, when Nvidia regularly surprised investors with huge earnings beats, appears to be fading. During that period, Nvidia sometimes saw stock moves of 10%, 15% or even 20% after earnings.
Investors now appear less convinced that Nvidia will suddenly report results far above expectations. This means the market is not expecting another massive earnings surprise that could send Nvidia stock sharply higher, according to Murphy via Reuters.
Nvidia stock has recently been under pressure
Nvidia shares fell for the seventh straight trading day on Monday. Despite the recent decline, Nvidia stock is still up 11.7% so far this year. The S&P 500 has gained 11.8% year to date.
The Philadelphia Semiconductor Index has performed much better, rising 61% this year. This shows that Nvidia has not kept pace with the broader semiconductor sector despite remaining one of the biggest AI stocks.
Nvidia earnings come during wider market pressure
Nvidia’s recent decline comes as Wall Street faces broader concerns. Rising energy prices and worries about growing US government debt have pushed Treasury yields higher.
The 30-year Treasury yield reached a 19-year high last week, increasing pressure on financial markets. The US Treasury has introduced measures aimed at reducing some of the stress in the bond market, according to Reuters.
Treasury yields remain an issue for tech stocks
Reports that Treasury Secretary Scott Bessent could use the government's nearly $1 trillion Treasury General Account to help fund bond buybacks helped push the 30-year Treasury yield slightly lower on Monday. However, the yield was still above 5%.
Higher bond yields can put pressure on growth and technology stocks because investors may become less willing to pay high prices for future growth. The recent rise in yields has therefore added pressure to Wall Street’s major stock indexes.
Fed signals could also affect Nvidia
Investors are also watching for clues about interest rates. Federal Reserve Chair Kevin Warsh is scheduled to speak in Jackson Hole, Wyoming, later this week, according to Reuters. His comments could give investors more information about how policymakers see the US economy. Investors will pay close attention to what he says about the economy and interest rates because changes in rate expectations can affect technology stocks.
What investors will watch in Nvidia earnings
Nvidia’s revenue guidance will be one of the biggest things investors watch after the results. Investors also want to know whether demand for Nvidia’s AI chips remains strong. Profit margins will be another important focus. The market will also look at whether major cloud companies are continuing to increase their spending on AI infrastructure.
Also read: Scott Bessent eyes $1 trillion US Treasury cashpile for bond buybacks
Nvidia is the dominant supplier of AI chips, making its earnings an important signal for the wider AI investment boom. This means Nvidia’s results could affect not only its own stock but also other companies linked to AI spending.
AI spending by cloud companies is a key issue
Major cloud companies have been spending huge amounts of money to build data centers and AI infrastructure. Investors want to know whether this spending will continue at the same pace.
Nvidia recently partnered with six major financial institutions on financing platforms targeting more than $500 billion for AI infrastructure, according to Reuters. The deal highlights how much money companies and governments may need to spend as they race to build data centers for AI workloads.
Why hyperscaler spending matters for Nvidia
Will Sterling, chief investment officer at TritonPoint Wealth, said Nvidia likely has a strong view of how much major cloud companies plan to spend on AI infrastructure. He said the return on investment from these large cloud companies is especially important.
If these companies believe their AI investments are generating strong returns, they are more likely to keep increasing their capital spending. Continued spending would be positive for Nvidia because these companies are major buyers of AI chips and data-center technology. Sterling said continued AI investment could also support a broader risk-on mood across the market.
So, will Nvidia stock rise or fall?
The options market is currently expecting a 5.4% move in Nvidia stock after earnings, meaning a major move is possible in either direction. However, the expected move is smaller than Nvidia’s 6.5% implied move before its May earnings and below its 7.4% historical average.
This suggests traders are preparing for a big move but are not expecting an extreme earnings surprise. The direction of the stock will likely depend on Nvidia’s revenue outlook, AI chip demand, profit margins and the future spending plans of major cloud companies.
Broader market factors, including Treasury yields and expectations for US interest rates, could also influence Nvidia shares after the results. With Nvidia acting as a key indicator for the AI trade, investors will be watching not just whether the company beats expectations, but what it says about future AI demand and spending.
