By Saqib Iqbal Ahmed
NEW YORK (Reuters) – Traders in the U.S. stock options market expect the upcoming earnings release from Nvidia (NVDA) to trigger a more than $300 billion swing in the stock price of the world’s largest maker of artificial intelligence chips.
Options prices show traders expect the company’s shares to rise about 9.8% on Thursday, a day after its earnings release, according to data from analytics firm ORATS. That’s bigger than the expected rise before any Nvidia report over the past three years and well above the stock’s average post-earnings gain of 8.1% over the same period, according to ORATS.
Given Nvidia’s market capitalization of about $3.11 trillion, a 9.8% change in the stock price would translate to about $305 billion, likely the largest expected earnings change for a company in history, analysts said.
Such a move would eclipse the market capitalization of 95% of S&P 500 companies, including Netflix and Merck, according to LSEG data.
The results from Nvidia, whose chips are widely considered the gold standard for artificial intelligence, also have big implications for the broader market. The stock is up nearly 150% year to date, accounting for about a quarter of the S&P 500’s 18% gain since the start of the year.
“He’s single-handedly 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 that’s supporting the market.”
Options prices suggest traders are more concerned about missing out on a big move up in Nvidia than being hurt by a big move down.
Traders see a 7% chance the stock will rise more than 20% by Friday, while they see only a 4% chance it will decline more than 20%, according to an analysis of options data by Susquehanna Financial.
“(Before earnings) people typically want to buy coverage, they want to buy insurance, but in the case of Nvidia, 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.”
One reason options traders are pricing in such a big move for Nvidia is because of the company’s stock volatility in the past.
Nvidia’s 30-day average historical volatility this year – a measure of how much the stock has changed over a rolling 30-day period – is about twice the average of the same measure for all other companies with a market capitalization greater than $1 trillion, according to a Reuters analysis of Trade Alert data.
“The options are simply reflecting the actual movement of the stock,” said Christopher Jacobson, a strategist at Susquehanna Financial Group, which manages Nvidia’s equity markets.
“It’s simply a function of the continued uncertainty/optimism around AI and the ultimate size of the opportunity, coupled with the fact that NVDA has become a highly followed stock among institutions and individuals,” he said.
(Reporting by Saqib Iqbal Ahmed; editing by Ira Iosebashvili and Jonathan Oatis)
