To The Moon

In 2023, Nvidia stock crushed the S&P 500 index, which managed to rise 24%. Shares have surged 59% so far this year, while the index is up 6.7%. Nvidia's historic run is minting profits for investors big and small. Many are betting the boom is just beginning.

They are piling into trades that the chipmaker's shares, which have more than tripled over the past year, are headed still higher. Some have turned to the options market to look for ways to turbocharge their bets on artificial intelligence after a blockbuster earnings report sent the stock up 17% over the past two days.

The exuberance reflects hope that the company is the vanguard of wide adoption of artificial intelligence -- and an intense fear of missing out among investors who have sat on the sidelines while the company's valuation has eclipsed $2
trillion.

Big picture planning

Nvidia has also morphed into one of the most popular trades in this market, with traders placing more than $20 billion in stock-options bets tied to the company over the past week, according to Cboe Global Markets data. That was more than what they spent on Tesla, Meta Platforms, Microsoft, Apple, Amazon and Alphabet combined.

Call options, contracts that confer the right to buy shares at a specific price, were particularly popular. And many of the trades appeared to suggest that investors were fearful of missing out on bigger gains to come. Some of the most active trades Friday were calls pegged to the shares jumping to $800 or $850, up from their closing price of $788.17. Betting against the shares has been a losing game, leading many investors to throw in the towel on bearish
wagers.

The values of many of these options bets exploded while Nvidia soared, rewarding those who piled in. The big gains also enticed others to join in the trades while the stock's rally continued.

⚠️ Trading tips: looking at NVDA calls above 795 to break 800, 805, 810 to revisit 820 early this week again. Avoid taking heavy sizing on Monday and have a stop loss at support area to protect capital. The lower the dip buy, the lesser risk to take on. New home sales report may cause some movement at 10am.

Costly options chain, need a stock split soon

Ahead of the tech behemoth's earnings report Wednesday, options pegged to the shares jumping to $1,300 -- around double where they were trading at the time -- were some of the most popular trades.

And for some investors, the 16% one-day jump in Nvidia's share price Thursday wasn't enough. They sought even bigger returns and piled into several niche exchange-traded funds that offer magnified exposure to Nvidia stock.

The GraniteShares 2x Long NVDA Daily ETF has taken in almost half a billion dollars from investors on a net basis since launching late in 2022. The fund's shares have more than doubled in 2024 and have surged nearly 650% since inception.

There have been few signs of profit-taking so far. Investors added a net $263 million to the fund in the past month. The fund's cousin, which turbocharges bearish bets against Nvidia, has been much less popular.

The euphoria surrounding Nvidia has spread to other stocks, too. Shares of Super Micro Computer, a much smaller company worth less than $50 billion, popped more than 30% Thursday after Nvidia's earnings report. Traders spent more than $5 billion on options tied to the company, more than what they spent on Tesla this week. Tesla is worth about 13 times as much as the company.

Nvidia's continued, rapid ascent has stunned even early bulls on semiconductors and generative AI.

"You look at these numbers and what this company's done -- it's almost without precedent," said Mike Ogborne, founder of San Francisco-based hedge fund Ogborne Capital Management, who counts Nvidia among his top five biggest holdings . "It is nothing short of amazing."

Nvidia's financial results Wednesday suggest its market share in AI chips of more than 80% isn't yet being challenged in a serious way. Nvidia's chips used for training AI systems are expected to remain in high demand for the foreseeable future.

Ogborne compared AI with the launch of the internet more than two decades ago, which kick-started a technology craze that lasted years. "It's exciting," Ogborne said. "It's great for America."

Economic news for the week

The economic calendar for the week ahead includes fresh data on new home sales, durable orders, and construction prices. Analysts think bond yields could push higher if inflation expectations return following the higher-than-expected CPI and PPI reports for January. The marquee event for inflation watchers could be the release of the core PCE core number on February 29. The release is considered the Federal Reserve's favored inflation gauge and could move the meter with interest rate expectations.

In the tech sector, analysts expect another dramatic week for semiconductor stocks after Nvidia's (NASDAQ:NVDA) earnings report sent the Santa Clara-based company's shares up more than 20% and led to strong rallies for AMD (AMD), Super Micro (SMCI), Arm (ARM), Marvell Technology (MRVL), and Micron (MU), to name just a few. The earnings calendar includes key releases from Li Auto (LI), Lowe's (LOW), eBay (EBAY), and Anheuser-Busch InBev (BUD).

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