Nvidia options price $280 billion swing as Q2 earnings loom

Options traders price a $280 billion swing in Nvidia's market value after the chipmaker reports second-quarter earnings Wednesday afternoon.

"The implied move shows some complacency for Nvidia, and it means it's getting more predictable," Matt Amberson, founder of analytics firm ORATS, said.

The 5.4% expected move is below the 6.5% priced before May's report and well under Nvidia's 7.4% average post-earnings swing over the past 12 quarters, ORATS data show. Wall Street expects revenue of about $92 billion, up 97% from a year earlier, with the data center segment contributing more than $83 billion, or over 90% of the total. Earnings per share are projected at $2.08 to $2.09.

The report lands as Nvidia's stock has fallen seven straight sessions, down nearly 9% from highs, with 30-year Treasury yields near a 19-year high pressuring growth stocks. A beat could reignite the AI trade; a miss could trigger a broad tech selloff.

Expectations and the narrowing beat margin

Nvidia has beaten its own guidance midpoint for thirteen consecutive quarters, but the outperformance premium has narrowed from more than 20% two years ago to about 4.6% last quarter. The company's Q2 guidance midpoint was $91 billion, plus or minus 2%. At a revenue base above $90 billion, even a 3% to 5% upside surprise requires nearly $4 billion in additional hardware sales in a single quarter.

"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," Chris Murphy, co-head of derivatives strategy at Susquehanna, said. "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."

What investors are watching

The buy side has set the passing bar for Q3 revenue guidance between $103 billion and $105 billion, according to Wall Street bank views compiled by the Financial Times. Management must also hold non-GAAP gross margin in the 74.5% to 75.5% range, with investors watching Blackwell architecture yield rates and TSMC's CoWoS advanced packaging capacity.

The four major hyperscalers — Microsoft, Google, Amazon and Meta — have set record combined quarterly capital expenditure, confirming demand for compute infrastructure. Nvidia recently partnered with six major financial institutions on platforms targeting more than $500 billion for AI infrastructure financing.

"Return on investment from the hyperscalers is really important," Will Sterling, chief investment officer at TritonPoint Wealth, said. "That will dictate whether or not they continue to invest with their capex."

Nvidia shares have risen 11.7% this year, versus an 11.8% gain for the S&P 500 and a 61% jump for the Philadelphia SE Semiconductor index. The earnings call, scheduled for after the close Wednesday, will test whether the AI trade can extend its run as investors also watch Fed Chair Kevin Warsh's Jackson Hole speech later this week.

This article is for informational purposes only and does not constitute investment advice.