Nvidia Earnings: Options Traders Expect $300 Billion Swing in Stock, Biggest Ever

The tech-heavy Nasdaq Composite pulled back Wednesday, pressured by declines in Nvidia, as investors braced for the chipmaker's latest earnings report. Wall Street is keeping an eye on Nvidia to gauge the sustainability of the broader tech and AI trade. The semiconductor giant — slated to report after the close — has surged 159% in 2024, raising questions of how much more room there is for the stock to run. On Wednesday, it fell 2%.

Traders in the U.S. equity options market are expecting Nvidia's (NVDA) upcoming earnings report to spark a more than $300 billion swing in the shares of the world's most dominant artificial intelligence chipmaker. Options pricing shows that traders anticipate a move of around 9.8% in the company’s shares on Thursday, a day after it reports earnings, data from analytics firm ORATS showed. That's larger than the expected move ahead of any Nvidia report over the last three years and well above the stock's average post-earnings move of 8.1% over that same period, according to ORATS.

Given Nvidia's market capitalization of about $3.11 trillion, a 9.8% swing in the shares would translate to about $305 billion, likely the largest expected earnings move for any company in history, analysts said. Such a move would dwarf the market capitalization of 95% of S&P 500 constituents, including Netflix and Merck, according to LSEG data.

The results from Nvidia, whose chips are widely seen as the gold standard in artificial intelligence, also have big implications for the broader market. The stock is up some 150% year-to-date, accounting for around a quarter of the S&P 500’s 18% year-to-date gain. "It alone has been a huge contributor to the overall profitability of the S&P 500," said Steve Sosnick, chief strategist at Interactive Brokers. "It's the Atlas holding up the market."

Options pricing suggests traders are more concerned about missing out on a large upside move from Nvidia than getting hurt by a large drop. Traders are assigning a 7% chance the stock rises more than 20% by Friday, while only a giving a 4% probability to a more than 20% sell-off, according to a Susquehanna Financial analysis of options data. "(Ahead of earnings) people typically want to buy hedges, they want to buy insurance, but in Nvidia's case, a lot of that insurance is FOMO insurance," Sosnick said, referring to the popular acronym for "fear of missing out." "They don't want to miss a rally."

Part of the reason options traders are pricing this large a move for Nvidia has to do with how volatile the company's shares have been in the past. Nvidia's average 30-day historical volatility this year - a measure of how much the stock has gyrated over a rolling 30-day period - is about twice the average of the same measure for all other companies with market caps higher than $1 trillion, according to a Reuters analysis of Trade Alert data. "The options are just reflecting how the stock is actually moving," said Christopher Jacobson, a strategist at Susquehanna Financial Group, which makes markets in the securities of Nvidia. "(It's) is just a function of continued uncertainty/optimism with regards to AI and the ultimate size of the opportunity coupled with NVDA having become such a widely followed stock among institutional and retail," he said.

Nvidia's Impact on the Market

The Expectations

Analysts are closely watching the report from the bellwether, which could determine where the market goes from here. Wall Street will also keep a close eye on guidance and commentary on Nvidia's Blackwell chips as concerns rise over the sustainability of megacap spending on AI, and reports of production delays surface. Other chip stocks declined in morning trading, with Micron Technology falling nearly 3%. Cadence Design Systems lost about 2%, while Advanced Micro Devices, Intel and Lam Research dipped about 1% each.

Beyond the Earnings Report

Traders are expecting Wednesday's Nvidia earnings report to move the stock more than normal, according to analysis of options market data by Goldman Sachs. "NVDA options are implying a +/- 10% move following earnings, higher than its four quarter average of 7%," John Marshall of the firm's derivatives research team said in a note to clients. Additionally, the options traders do not seem to be collectively picking a side on how the report will play out. "Both volumes and skew suggest balanced positioning from investors ahead of earnings. NVDA options account for 20% of all single stock options volumes over the past month; while this is below volumes ahead of the May quarter, it remains one of the top stocks by dollar options volume," the note said. Shares of the chipmaker were up less than 1% in premarket trading.

Nvidia's Influence on the Market

Nvidia's upcoming quarterly results are "pretty important," according to Citi's Scott Chronert. "There's no question from a basic index weighting perspective the importance of Nvidia is very clear on this," the firm's U.S. equity strategist told CNBC's "Squawk on the Street," citing the artificial intelligence darling's influence on the midyear gains of the S&P 500. In June, Nvidia's weighting in the broad market index had reached 6.6%, per FactSet. In terms of whether an AI spending and AI productivity enhancing tailwind is taking place, Chronert believes more evidence is needed. "It won't be the earnings result per se as much as it is what we're talking to in terms of guidance going forward," he added. Nvidia is set to report its second-quarter earnings for fiscal 2025 after market close on Wednesday. Shares of the company have surged 159% this year.

A Key Indicator of AI's Future

Nvidia's upcoming earnings report is "pretty important," according to Citi's Scott Chronert. "There's no question from a basic index weighting perspective the importance of Nvidia is very clear on this," the firm's U.S. equity strategist told CNBC's "Squawk on the Street," citing the artificial intelligence darling's influence on the midyear gains of the S&P 500. In June, Nvidia's weighting in the broad market index had reached 6.6%, per FactSet. In terms of whether an AI spending and AI productivity enhancing tailwind is taking place, Chronert believes more evidence is needed. "It won't be the earnings result per se as much as it is what we're talking to in terms of guidance going forward," he added. Nvidia is set to report its second-quarter earnings for fiscal 2025 after market close on Wednesday. Shares of the company have surged 159% this year.

The Big Picture

Nvidia's upcoming earnings report is expected to be a major event for the market, with options traders anticipating a significant move in the stock price. The results will be closely watched for signs of the sustainability of the AI boom, and could have a major impact on the broader market.