"Super heavyweight" Nvidia is scheduled to announce its financial report after the U.S. stock market closes on Wednesday (early Thursday morning, Beijing time). The stock ended its multi-day rally the day before the financial report was released. It fell nearly 7% during the session on Tuesday and closed down about 4.4%. %, reported at US$694.52 per share, pulling down the large-cap stock index, and the market value was overtaken by Amazon and Google. Traders will be looking for confirmation that the chipmaker can meet the high expectations set by the artificial intelligence boom.

Thanks to its undisputed leadership in artificial intelligence training chips, Nvidia's market value has soared to about $1.7 trillion, once exceeding the market values ??of Amazon.com Inc. and Alphabet Inc. While other big tech companies are hardly doing worse in 2024, they appear to be relegated to the slow lane compared to Nvidia's surge.

Market analysts believe that even if Nvidia can deliver slightly stronger than expected financial reports, it will be difficult to justify its excessive valuation. Considering that Nvidia has contributed to a quarter of the S&P 500 index's increase this year, this week's Nvidia earnings report is regarded as a watershed for market trends. If Nvidia does not significantly increase its profit outlook, can the U.S. stock market continue to rise?

Based on options positions, Nvidia could have nearly $200 billion in market capitalization depending on this week's earnings report. Prices of short-term call and put options on the chipmaker on Thursday, the day after Nvidia reported earnings, suggested a 10.6% swing in the stock, according to data compiled by Bloomberg. That would cause Nvidia's market value to fluctuate by about $180 billion, setting one of the largest single-day moves in history, though it would still fall short of Meta Platforms Inc.'s record for the largest single-day drop and largest single-day gain.

Traders are bracing for more volatility as Nvidia has tripled in value over the past year, driven by the artificial intelligence craze that has also driven the broader U.S. stock market. Nvidia is the best-performing stock in the S&P 500 so far this year, and about 30% of the index's gains this year have been contributed by these large technology companies, so large fluctuations may spread to the entire major U.S. benchmark stock index.

Christopher Jacobson of Susquehanna International Group said: "Significant volatility has some people worried about valuation and afraid to add or take positions, but at the same time, they are worried about missing out if it rises again. Therefore, many people view call options as A choice with limited risk.”

Historic Moves in NVIDIA Option Prices

Market participants have been preparing for additional gains for months - paying premiums for Nvidia call options as traders became more interested in betting on further gains than guarding against a pullback. Some of the largest options with open interest are call options between $1,010-$1,380, some of which are expiring this weekend. To reach that high, the stock price would need to rise significantly by more than 39% from Friday's close.

While Nvidia's stock price has been fairly flat the day after its last two earnings reports, the stock rose 14% and 24% respectively after the earnings reports in February and May last year. As of Friday's close, options markets showed a one-in-four chance that Nvidia shares would break above the $620 to $850 range, which would represent a 15% decline or a 17% rise, according to data compiled by Susquehanna.

For Miller Tabak + Co.'s Matt Maley, while some are betting that Nvidia will post strong earnings and forecasts, the important thing to remember is that the stock isn't always sure of outperformance. react well. "Sometimes their expectations are too high and we have a sell-on-the-high reaction," Malley said. "We don't know what the reaction is going to be this week, so if investors and traders on Wednesday night We would not be surprised if there is no action until the report is released."

Article forwarded from: Golden Ten Data

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