Options market data indicates traders anticipate a potential $355 billion swing in NVIDIA's market value following its first-quarter earnings report on Wednesday. Sentiment remains optimistic for this AI leader, though investors are also eager to secure profits and manage risk.
Options pricing suggests the stock could move approximately 6.5% in either direction on Thursday, the day after the earnings release.
This projected movement translates to a market cap fluctuation of around $350 billion, a figure exceeding the total market value of roughly 90% of the individual companies within the S&P 500.
Data from Options Research and Technology Services (ORATS) shows this implied volatility expectation is higher than the 5.6% level ahead of its February report but remains well below NVIDIA's historical average stock price volatility of 7.6%.
This indicates a growing investor confidence in NVIDIA's earnings, despite lingering broader market concerns about the sustainability of massive industry-wide AI capital expenditures.
"Investors have become more relaxed about the AI theme and the capital expenditure cycle," said Matt Amberson, founder of ORATS.
Some individual trades underscore strong bullish sentiment, betting on another earnings beat. Chris Murphy, co-head of derivatives strategy at market maker Susquehanna, noted a significant trade on Monday: a purchase of 25,000 call spread options expiring June 1st for $1.78 each. This trade bets on NVIDIA's stock rising about 16% to around $260 per share within two weeks, with a potential return exceeding seven times the initial investment.
Murphy stated that NVIDIA options positioning has shifted towards calls, with demand for bullish setups continuing to rise.
"The market is no longer just buying puts for downside protection but is increasingly positioning for upside gains," he said. He also noted that bullish bets on U.S. tech stocks have climbed from a five-year low in March to a five-year high by mid-May.
**Hedging Activity in the AI Sector**
While traders are broadly bullish on NVIDIA, there is increased hedging and profit-taking activity in individual semiconductor stocks and related ETFs. Even the most optimistic investors are looking to lock in gains following the sector's significant rally.
This push-and-pull dynamic is a key market feature ahead of earnings season: expectations are elevated, and the bar for NVIDIA, the central figure in the AI rally, continues to rise.
Year-to-date, NVIDIA's stock has gained 19%, compared to an 8% rise for the S&P 500 and a substantial 57% surge for the Philadelphia Semiconductor Index.
Murphy said investors will closely watch whether NVIDIA's report validates the recent price and volatility uptrend in AI and chip stocks. Key focus areas include data center demand, capital expenditure trends from major tech giants, corporate profit margins, and future guidance—all crucial for sustaining the AI rally.
He added, "It's also important to note that the semiconductor sector is now a crowded, leading trade. Signals from the options market show money is still willing to chase NVIDIA higher, but it is also starting to hedge risk and take profits in other popular, high-flying names."
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