Saqib Iqbal Ahmed
NEW YORK (Reuters) – U.S. stock options traders are betting that the next earnings report from Nvidia Inc (NVDA), the world’s largest artificial intelligence (AI) chipmaker, could drive a move of more than $300 billion in the company’s shares.
Options prices suggest traders expect Nvidia’s shares to move about 9.8% on Thursday, the day after the company reports earnings, according to data from analytics firm ORATS. That’s more than Nvidia’s pre-earnings expectations over the past three years and well above the average 8.1% move in the stock price after earnings during that period, according to ORATS.
Analysts say Nvidia’s market capitalization is about $3.11 trillion, so a 9.8% change in its stock price would mean about $305 billion in losses, perhaps the biggest corporate profit swing in history.
Such a move would far exceed the market capitalization of 95% of the S&P 500 stocks, including Netflix and Merck, according to LSEG data.
Nvidia, whose chips are widely considered the gold standard for artificial intelligence, is also a big driver of the broader market: Its shares are up about 150% this year, accounting for about a quarter of the S&P 500’s 18% gain so far this year.
“Atlas alone has been a huge contributor to the overall profitability of the S&P 500,” said Steve Sosnick, chief strategist at Interactive Brokers. “Atlas is propping up the market.”
Options prices suggest traders are more worried about missing out on a big rally in Nvidia than they are about losing money on a big drop.
Traders estimate there is a 7% chance that stocks will rise more than 20% by Friday, but only a 4% chance that they will sell off more than 20%, according to an analysis of options data by Susquehanna Financial.
“Typically, people want to buy hedges, they want to buy insurance, but in Nvidia’s case, a lot of that insurance is FOMO insurance,” Sosnick said, referring to a common acronym that stands for “fear of missing out.”
“They don’t want to miss the rally.”
Part of the reason options traders are pricing in such a big move for Nvidia has to do with how volatile the company’s stock has been in the past.
Nvidia’s 30-day average volatility this year is roughly double the average for the same metric for all other companies with market capitalizations over $1 trillion, according to a Reuters analysis of Trade Alert data.
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“Options just reflect the actual movement of the stock price,” said Christopher Jacobson, a strategist at Susquehanna Financial Group, which makes a market in Nvidia securities.
“This is simply a result of the continued uncertainty and optimism around AI, the ultimate size of the opportunity, and NVDA becoming a very hot stock among institutional and retail investors,” he said.
(Reporting by Saqib Iqbal Ahmed; Editing by Illa Iosebashvili and Jonathan Oatis)
