Traders are forecasting a potential change in Nvidia's market value of $280 billion (4.5 trillion rupees) after the company publishes its second-quarter earnings report on Wednesday afternoon. Investors are seeking new information regarding the demand driving the technology sector.
Options on the chip manufacturer's stock suggest a movement of 5.4% in either direction on Thursday, which is one day after the results announcement. This forecast is lower than the 6.5% movement implied before the May earnings report.
The expected movement is equivalent to approximately $280 billion in capitalization, exceeding the individual market value of about 90% of S&P 500 components. According to the analytical firm Option Research & Technology Services (Orats), the anticipated growth is still significantly below Nvidia's historical average price fluctuation of 7.4% over the last 12 quarters.
Matt Amberson, founder of Orats, noted that this indicates some complacency regarding Nvidia, making it more predictable.
Chris Murphy, co-head of derivatives strategy at Susquehanna, notes that the relatively modest movements reflect a trend of the past two years, where actual stock fluctuations after earnings announcements have often been less than what was implied in options markets.
Murphy added that the era of artificial intelligence, when Nvidia consistently exceeded expectations with huge profit figures and showed growth of 10%, 15%, or 20%, seems to be over. He believes there are no high expectations that the company can surprise everyone with a giant result leading to strong stock growth.
Nvidia shares fell for the seventh consecutive day on Monday, but they have risen by 11.7% this year. The S&P 500 index has increased by 11.8% since the beginning of the year, and the Philadelphia semiconductor index has grown by 61%.
General Market Uncertainty
Nvidia's decline occurred against a backdrop of general market uncertainty. Concerns over rising energy prices and increasing US national debt pushed up US Treasury yields; a week ago, 30-year yields reached a 19-year high, prompting the Treasury to consider measures to ease market tension.
The recent surge in yields negatively impacted growth and technology stocks, lowering major Wall Street indices and increasing attention to the planned speech by Federal Reserve Chairman Kevin Warsh in Jackson Hole, Wyoming, later this week. This speech may provide insight into how policymakers view economic prospects, especially concerning interest rates.
Against this background, investors will closely monitor Nvidia's revenue forecasts, chip demand, profit margins, and whether major cloud providers continue to increase AI-related capital expenditures. Since Nvidia is a leading supplier of chips for AI, it is viewed as an indicator for the entire AI sector.
Recently, Nvidia partnered with six major financial institutions to create financing platforms aimed at raising over $500 billion for AI infrastructure, highlighting the enormous capital required by companies and governments to build data centers for AI workloads.
Will Sterling, Investment Director at TritonPoint Wealth, stated that Nvidia likely has 'a pretty good idea of the hyperscalers' capital expenditure trajectory. The return on investment from hyperscalers is indeed important.' He added that this will determine whether they continue to invest within their capital expenditures, and if so, it will be beneficial for the risk of the entire ecosystem.