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Investors and speculators are gearing up for Nvidia Corp.‘s (NASDAQ:NVDA) earnings report on Wednesday, an event that’s expected to send ripples, if not tidal waves, across the U.S. stock market.
If the options market is right, Nvidia’s results could spark moves in the S&P 500 index – as tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY) – larger than those typically triggered by key economic data like the employment and inflation reports.
Nvidia’s dominance in the AI-driven technology trade has turned its earnings into a barometer for overall market sentiment, and its influence on the stock market is unparalleled.
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Over the past year, Nvidia accounted for 20% of the S&P 500’s total returns and Bank of America’s derivatives analyst Gonzalo Asis didn’t mince words: “It remains the most dominant stock in the market… expected to drive nearly 25% of the S&P 500’s EPS growth in 3Q.”
In essence, whether Nvidia beats or misses expectations, the ripple effects will likely extend far beyond its ticker.
The options market implies a potential 1.05% move in the S&P 500—higher than what traders expect from next month’s Non-Farm Payroll (NFP) data, Consumer Price Index (CPI) print, and in line with the Federal Reserve’s December meeting.
“Options are assigning more broad-market risk around NVDA earnings than around next month’s NFP and CPI days, and as much as the Dec FOMC,” the analyst noted.
For Nvidia shares themselves, the implied one-day move is even more eye-popping: 12.5%.
“We remain cautious of fragility risks in single names around earnings, but NVDA hedges themselves are not particularly cheap relative to how much the stock has reacted to results in the last two years,” Assis wrote.
The analyst also warned that the recent easing of post-election euphoria and heightened single-stock fragility can be reasons for traders to hedge against potential market turbulence if Nvidia disappoints.
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For traders seeking to hedge the broader market risks tied to Nvidia’s performance, Bank of America recommended an option strategy using put spreads on the Nasdaq-100 ETF, the Invesco QQQ Trust (NASDAQ:QQQ). Specifically, the QQQ 22Nov 490-480 put spreads are priced at $2 and could offer a 5x payout if the Nasdaq-100 falls by roughly 3.3% this week.
Despite the potential need for hedges, the bank also noted that hedging NVDA earnings directly is not cheap, considering how significantly the stock has reacted to its last few earnings reports.
Data from Benzinga Pro shows that over the last 12 quarters, Nvidia has exceeded earnings-per-share (EPS) expectations 10 times and missed revenue expectations only once.
On average, Nvidia shares moved 5.3% in the single trading day following its earnings release.
The largest 1-day gain followed its first quarter 2024 earnings, when the stock surged 24.4%, while the worst reaction occurred after fourth quarter 2024 results, with a decline of 7.6%.
Here’s a snapshot of the company’s recent earnings performance:
|
Fiscal Quarter |
Date Announced |
Surprise % EPS |
Surprise % Revenue |
1-Day % NVDA Move |
|---|---|---|---|---|
|
Q2-2025 |
8/28/24 |
6.25% |
4.73% |
-6.38% |
|
Q1-2025 |
5/22/24 |
2.86% |
5.66% |
9.32% |
|
Q4-2024 |
2/21/24 |
11.45% |
7.19% |
16.40% |
|
Q3-2024 |
11/21/23 |
19.64% |
12.39% |
-2.46% |
|
Q2-2024 |
8/23/23 |
29.19% |
20.38% |
0.10% |
|
Q1-2024 |
5/24/23 |
18.48% |
10.31% |
24.37% |
|
Q4-2023 |
2/22/23 |
8.64% |
0.68% |
14.02% |
|
Q3-2023 |
11/16/22 |
-15.94% |
2.79% |
-1.46% |
|
Q2-2023 |
8/24/22 |
-59.20% |
-17.23% |
4.01% |
|
Q1-2023 |
5/25/22 |
5.43% |
2.07% |
5.16% |
|
Q4-2022 |
2/16/22 |
8.20% |
3.01% |
-7.56% |
|
Q3-2022 |
11/17/21 |
6.36% |
4.00% |
8.25% |
Data: Benzinga Pro
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This article Why Nvidia Earnings May Trigger Massive S&P 500 Volatility originally appeared on Benzinga.com
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