Written by Saqib Iqbal Ahmed
NEW YORK (Reuters) – U.S. options traders expect Nvidia’s upcoming earnings report to drive a more than $300 billion surge in the shares of the world’s largest artificial intelligence chipmaker.
Options pricing shows traders are expecting about a 9.8% move in the company’s shares on Thursday, the day after it reports earnings, data from analytics firm ORATS showed. That’s larger than the move expected before any Nvidia report over the past three years and well above the stock’s average post-earnings move of 8.1% over the same period, according to ORATS.
Given Nvidia’s market cap of about $3.11 trillion, a 9.8% move in the stock 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 value of 95% of the companies in the S&P 500, including Netflix and Merck, according to data from the London Stock Exchange.
The results from Nvidia, whose chips are widely considered the gold standard in artificial intelligence, are also having big implications for the broader market. The stock is up about 150% year to date, accounting for about a quarter of the S&P 500’s 18% year-to-date gain.
“This alone has been a major contributor to the overall profitability of the S&P 500,” said Steve Sosnick, chief strategist at Interactive Brokers. “It’s the atlas that supports the market.”
Options prices suggest that traders are more worried about missing out on a big Nvidia move than getting hurt by a big decline.
Traders are giving the stock a 7% chance of a more than 20% rise by Friday, while giving it just a 4% chance of a more than 20% sell, according to a Susquehanna Financial analysis of options data.
“Before 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,” Sosnik said, referring to the common acronym for “fear of missing out.”
“They don’t want to miss any gathering.”
Part of the reason options traders are pricing in such a big move for Nvidia has to do with the volatility the company’s stock has seen in the past.
Nvidia’s historical 30-day average volatility this year — a measure of how volatile a stock is over a consecutive 30-day period — is about double the average of the same measure for all other companies with a market capitalization above $1 trillion, according to a Reuters analysis of Trade Alert data.
“Options just reflect how the stock actually moves,” said Christopher Jacobson, a strategist at Susquehanna Financial Group, which markets Nvidia’s stock.
“It’s just a result of the ongoing uncertainty/optimism around AI and the ultimate size of the opportunity coupled with NVDA becoming a widely followed stock among institutions and retail,” he said.
(Reporting by Saqib Iqbal Ahmed; Editing by Ira Iosbashvili and Jonathan Oatis)
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