Market Volatility Ahead: Nvidia’s Earnings Report Looms Large
As the world’s most valuable company, Nvidia Corp. is set to release its highly anticipated quarterly earnings report, sending shockwaves through the market. The chipmaker’s stock has rallied an impressive 200% so far this year, making it the poster child of the artificial intelligence trade. However, the upcoming report carries more risk for the benchmark than the next Federal Reserve meeting or inflation data, according to strategists at Bank of America.
The Blackwell Enigma
Nvidia’s newest product line, Blackwell, has sparked varying views on Wall Street about what to expect from the company’s revenue guidance. While CEO Jensen Huang described demand for the chips as “insane,” production delays have made modeling supply a notoriously difficult task. Dan Eye, chief investment officer at Fort Pitt Capital Group, notes that “there’s a big unknown around Blackwell capacity.” The uncertainty has led to a wide spread in analyst expectations for the fiscal fourth quarter, with a gap of more than $7 billion between the highest and lowest projections.
Analysts Weigh In
Morgan Stanley analyst Joseph Moore expects customers to delay purchases of Blackwell’s predecessor products, calling Wednesday’s results a “transitional” quarter. He predicts Nvidia will give a conservative forecast that’s only slightly ahead of the average analyst estimate. On the other hand, Jim Worden, chief investment officer of Wealth Consulting Group, is less concerned about the timing of Blackwell, citing strong demand and a promising full-year ramp.
A High Bar to Clear
Nvidia’s history of beating estimates in a big way has set a high bar for the company’s performance. If the results fall short of expectations, it could spell trouble for the stock, which is trading close to a record high. Rick Bensignor, CEO of Bensignor Investment Strategies, warns that “it can’t just beat the consensus, but also the whisper-type numbers that people are looking for.” A disappointment could lead to a 10% or more decline in the stock.
Broader Market Implications
The implications of Nvidia’s results might not have been fully priced in, according to Charlie McElligott, Nomura’s cross-asset strategist. Option straddles on the Invesco Nasdaq 100 ETF are only implying a 1.7% move for Thursday, which “maybe ‘feels’ light.” The market may be expecting perfection, and any deviation from that could lead to volatility.
The Stage is Set
With Nvidia’s earnings report just around the corner, traders are bracing for a potentially massive stock swing. The options-implied move for Nvidia shares is about 8% in either direction, which would equate to a $300 billion swing in market value – bigger than all but 25 companies in the S&P 500 Index. The world is watching, and the stakes have never been higher.
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