Traders are assigning the market a roughly $355 billion potential change in Nvidia's market capitalization as the company prepares to report first-quarter results, based on options activity that points to persistent bullishness alongside rising protection strategies.
Options on the chipmaker imply an expected move of about 6.5% in either direction on Thursday, the day after Nvidia issues its earnings. That percentage equates to an approximate $350 billion swing in market value - a magnitude larger than the individual market capitalization of roughly 90% of S&P 500 constituents.
That implied move is larger than the 5.6% market expectation ahead of Nvidia’s February earnings, yet remains below the company’s historical average post-earnings swing of 7.6%, according to analytics firm Option Research & Technology Services (ORATS). The contrast suggests a market that is slowly growing more relaxed about the company’s near-term results even as underlying concerns about the sustainability of massive AI-related capital expenditure persist.
"I think investors have become complacent about AI/capex," said Matt Amberson, founder of ORATS.
Cited trades illustrate the conviction among some investors that Nvidia can again surprise to the upside. One such transaction on Monday involved the purchase of a 25,000 call spread expiring June 1 for $1.78, a bet described by Chris Murphy, co-head of derivatives strategy at Susquehanna, that Nvidia could rise roughly 16% to $260 per share within the ensuing two weeks. That position carries the potential to return more than seven times the initial cost if the stock reaches the target.
Murphy also noted a broader shift in options demand: the skew has moved in favor of calls, signaling increased appetite for upside exposure. "The market is no longer simply paying up for downside protection. It is increasingly paying for upside participation," Murphy said, adding that bets on rising prices of tech stocks had swung from a five-year low in March to a five-year high by mid-May.
Even as options flow shows growing willingness to chase gains in Nvidia, hedging and profit-taking across semiconductor equities and related exchange-traded funds reveal that many investors are simultaneously protecting recent returns. That dynamic - strong bullish interest paired with risk management - frames investor posture heading into earnings: expectations are elevated and the bar for Nvidia, central to the AI trade, continues to rise.
Nvidia’s shares have risen 19% so far this year. By comparison, the S&P 500 is up 8% year to date, and the Philadelphia SE Semiconductor Index has surged 57% over the same period. Investors will be watching Nvidia’s results for confirmation that the recent advances in pricing and volatility across AI and chip stocks are supported by fundamentals.
Specifically, market participants will look for signals on data center demand, hyperscaler spending, margins and forward guidance - all elements Murphy identified as critical to sustaining the AI-driven rally. He emphasized that while options activity shows willingness to keep pursuing upside in Nvidia, there is growing inclination to lock in or hedge gains elsewhere.
"The other thing to keep in mind is that semi(conductors) have become a crowded leadership area. The options market is saying they are still willing to chase upside in Nvidia, but they are also starting to hedge or monetize gains in other crowded winners," Murphy said.
The coming earnings release and the market’s reaction will therefore serve as an important checkpoint: they will test whether the combination of rising prices and elevated volatility across AI and chip names is justified by the underlying business trends that traders have been pricing via options markets.