Options markets are signalling that Nvidia (NASDAQ:NVDA) could experience a roughly $280 billion change in market capitalisation following its second-quarter earnings report on Wednesday afternoon, as investors look for fresh evidence on the strength of artificial intelligence demand.
Nvidia options imply a 5.4% move in either direction on Thursday, the first full trading session after the results. That is below the 6.5% swing priced into options ahead of the company’s May earnings announcement.
A 5.4% move would translate into approximately $280 billion of market value, an amount larger than the individual capitalisation of roughly 90% of companies in the S&P 500.
The expected move is also below Nvidia’s average post-earnings share-price swing of 7.4% over the previous 12 quarters, according to analytics firm Option Research & Technology Services (ORATS).
“That shows some complacency for Nvidia, and it means it’s getting more predictable,” said Matt Amberson, founder of ORATS.
Options traders expect less dramatic earnings reaction
The comparatively restrained expectations follow a pattern over the past two years in which Nvidia’s actual post-results share-price moves have frequently been smaller than those implied by the options market.
Chris Murphy, co-head of derivatives strategy at market maker Susquehanna, said investors are no longer expecting the type of dramatic earnings surprises that characterised the early stages of the AI investment boom.
“I think the beginning of the AI era when Nvidia was surprising everybody with the huge earnings beats and 10, 15, 20 percent moves, that’s kind of over,” said Murphy. “There’s just not a huge view that they’re going to catch everybody off-guard with some giant beat and the stock’s going to really rally.”
Nvidia shares fell for a seventh consecutive session on Monday but remained 11.7% higher for the year. By comparison, the S&P 500 had gained 11.8%, while the Philadelphia SE Semiconductor index was up 61%.
Higher Treasury yields add pressure to technology stocks
Nvidia’s recent weakness has coincided with broader concerns across financial markets, including rising energy prices and mounting US government debt.
Those worries have pushed Treasury yields higher, with the 30-year yield reaching a 19-year high last week and prompting the US Treasury to announce measures intended to ease strains in the bond market.
Reports that Treasury Secretary Scott Bessent could use part of the government’s nearly $1 trillion Treasury General Account to help finance bond repurchases instead of increasing new issuance pushed the 30-year yield slightly lower on Monday. However, it remained above 5%.
The increase in borrowing costs has weighed particularly heavily on growth and technology shares, contributing to declines across Wall Street’s major indexes.
Investors are consequently paying close attention to Federal Reserve Chair Kevin Warsh’s upcoming speech at Jackson Hole, Wyoming, for possible indications about the central bank’s assessment of the economy and future interest-rate policy.
Nvidia guidance could determine direction of broader AI trade
Against this backdrop, Nvidia’s earnings report will be closely examined for its revenue outlook, demand for its chips, profit margins and signs that major cloud computing companies remain willing to increase spending on artificial intelligence infrastructure.
As the dominant supplier of advanced AI processors, Nvidia has become one of the most important indicators of demand across the wider artificial intelligence ecosystem.
The company recently partnered with six major financial institutions on financing platforms targeting more than $500 billion for AI infrastructure, illustrating the enormous capital requirements associated with the global expansion of AI data centres.
Investors will therefore be looking beyond Nvidia’s headline earnings numbers to assess whether hyperscale cloud providers continue to see sufficient returns to justify their rapidly growing capital expenditure.
Nvidia probably has “a pretty good pulse on the hyperscaler capex trajectory. Return on investment from the hyperscalers is really important,” said Will Sterling, chief investment officer at TritonPoint Wealth. “That will dictate whether or not they continue to invest with their capex. If that happens, then I think that’ll be beneficial from a risk-on perspective in the entire ecosystem.”