Nvidia (NVDA), the chip giant at the forefront of the AI revolution, is set to report earnings on Wednesday, May 24th. 

Traders anticipate a major move in Nvidia’s stock price following the release, with options markets pricing in a potential 8.7% swing in either direction by the end of this week.

While an 8.7% move may not sound extreme for a volatile tech stock, a company of Nvidia’s massive $2.3 trillion market capitalization translates to a staggering $200 billion move up or down. 

To put that in perspective, $200 billion is larger than the total market cap of around 90% of S&P 500 companies.

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• Nvidia’s earnings could spark a $200 billion stock move, which would be larger than the combined market value of 90% of S&P 500 companies.

• Options traders are pricing in an 8.7% Nvidia stock swing, though past moves have averaged 12%

• A disappointing Nvidia report could “test investors’ resolve” in the broader AI trade.

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Nvidia Earnings Could Spark Massive $200 Billion Swing in Market Cap

Nvidia’s Expected Move vs Past Volatility 

The expected 8.7% stock swing is actually on the lower end compared to Nvidia’s past earnings moves. 

After the chipmaker’s previous earnings report, its shares skyrocketed over 16%. 

Over the last eight quarters, options traders had priced in an average 12% post-earnings move for Nvidia.

“Volatility and expectations had been a fair amount higher the last time around,” commented Chris Murphy of Susquehanna Financial Group, suggesting the 8.7% expected move could be underestimating Nvidia’s potential volatility.

Nvidia’s Massive Market Impact 

Up an incredible 87% year-to-date, Nvidia now has a market capitalization of $2.3 trillion, making it the 3rd largest public company behind only Microsoft and Apple. 

As a bellwether for the white-hot AI industry, all eyes are on Nvidia this earnings season.

Wall Street is anticipating a blowout quarter, with analysts forecasting earnings per share of $5.59 and a nearly 250% year-over-year revenue surge to $24.65 billion. 

While optimism is sky-high, any disappointment could trigger a major selloff, given the lofty expectations baked into the stock price.

AI Hype Broadens, But Nvidia Remains Crucial

According to BofA, while investor interest in AI plays has broadened to other sectors like power, commodities, and utilities, Nvidia remains the centerpiece. 

The bank’s strategists believe Nvidia alone will drive 9% of the S&P 500’s earnings growth over the next year, down from an incredible 37% over the past 12 months.

“It’s not just about NVDA anymore,” BofA wrote, but the firm still views the chipmaker as the key driver of AI-related earnings for the time being.

Violent Moves Expected In Either Direction Analyzing options markets, traders appear to be pricing in the potential for huge moves up or down following Nvidia’s report. 

The implied volatility for bullish call options is roughly equal to bearish puts, suggesting the options market “is not writing off the possibility of more upside,” according to ORATS’ Matt Amberson.

“Traders expect up moves to be as violent as down moves,” Amberson stated, setting the stage for a pivotal event that could make or break Nvidia’s epic 2023 rally.

While the AI boom has broadened to other sectors, “a lot is riding on the AI trade,” as Interactive Brokers’ Steve Sosnick warned. 

If Nvidia disappoints and sells off hard, it could “test investors’ resolve regarding the broader AI trade.”

Given Nvidia’s immense market capitalization and influence over AI sentiment, all eyes will be on the chipmaker’s earnings release and the subsequent market reaction as a trendsetter for the AI craze.

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