Nvidia Corp. (NASDAQ:NVDA) is set to report earnings after the close Wednesday, and options traders are positioning for a sizable move in the AI chip leader's stock.
- NVDA stock is moving ahead of earnings. See the price action here.
Expectations remain high heading into the print. Consensus estimates call for adjusted earnings of $1.76 per share on revenue of $78.8 billion, according to Benzinga Pro data.
But for Nvidia, the question is rarely whether the company can beat Wall Street estimates. It is whether the beat, and more importantly the guidance, will be strong enough to satisfy investors.
NVDA Options Activity
Adam Turnquist, chief technical strategist for LPL Financial, said options activity has picked up ahead of the report as traders brace for volatility.
"Option activity has accelerated sharply ahead of the event, with the $250 call strike and $200 put strike carrying the highest levels of open interest," Turnquist said.
"Bullish positioning continues to dominate, with call demand significantly outpacing put demand and pushing the put/call open interest ratio down to roughly 0.57, a sign of elevated optimism heading into the report," the strategist added.
The options market is pricing in an approximately 5.5% post-earnings move on an absolute basis, according to Turnquist.
Based on Tuesday's close of $220.61, that implies an expected trading range of roughly $208.48 to $232.74 following the earnings release.
The All-Important Guidance
Investors will also be focused on Nvidia's forward outlook.
Stephen Callahan, trading behavior specialist at Firstrade, told Benzinga exclusively that the market will be laser-focused on Nvidia’s guidance for the next quarter and full year.
"Investors will be looking to see if Nvidia beats the earnings and revenue estimates," Callahan said. "But the main thing investors will be looking at is the guidance the company gives for next quarter and the full year."
Callahan said investors will also be watching for updates on Nvidia's role in the broader AI buildout, whether it can make money on new products such as central processing units, and how it manages supply constraints in the memory chip market.
Nvidia remains firmly at the center of the AI infrastructure boom. Callahan noted that the company's largest data center customers, Alphabet, Amazon, Meta and Microsoft, have outlined more than $700 billion in combined AI infrastructure spending this year.
All except Amazon raised full-year capital spending guidance during their latest earnings calls.
‘Anything is Possible'
Still, a strong report may not guarantee a rally. Callahan warned the stock's reaction may not match the headline numbers.
"Nvidia's stock doesn't always react as positive as the earnings would imply," Callahan told Benzinga, adding that shares recently broke out of a $175-to-$195 trading range and now sit near $221.
"So anything is possible," he added.
With bullish options positioning elevated and expectations already high, Nvidia's guidance, margins and AI demand commentary may determine whether the stock's next big move is higher or lower.
NVDA Price Action: Nvidia stock was up 1.97% at $224.96 at the time of publication on Wednesday, according to Benzinga Pro.
Over the past month, NVDA has gained about 12.5% versus a 4.1% rise in the S&P 500 and is up roughly 19% year-to-date compared to the index’s 7.6% gain.
Photo: Blossom Stock Studio / Shutterstock
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