Nvidia shares set for $350 billion price swing after earnings, options show

By Laura Matthews

NEW YORK, May 19 (Reuters) - Traders are pricing in a $355 billion swing in Nvidia's market value after the company reports first-quarter earnings on Wednesday, according to options positions that indicate the market is ‌still bullish on the AI giant while keen to protect gains.

The chipmaker's options imply a move of about ‌6.5% in either direction on Thursday, a day after the company reports results.

That would translate into a swing of roughly $350 billion in market capitalization - more ​than the individual market value of about 90% of S&P 500 constituents.

While that is higher than the 5.6% move implied ahead of the company's February earnings, it is still well below Nvidia's historical average price swing of 7.6%, according to analytics firm Option Research & Technology Services (ORATS).

That suggests the market is becoming more sanguine about the company's earnings, despite long-simmering fears that massive AI capital expenditure more ‌broadly may prove unsustainable.

"I think investors have ⁠become complacent about AI/capex," said Matt Amberson, founder of ORATS.

Some individual trades underscore a strong conviction that Nvidia could once again deliver an upside surprise. One notable Monday trade was the purchase of a ⁠25,000 call spread expiring June 1 for $1.78, betting that Nvidia could rise roughly 16% to $260 per share in the next two weeks, with a potential payoff more than seven times the initial cost, according to Chris Murphy, co-head of derivatives strategy at Susquehanna, a market ​maker.

Murphy ​said the chipmaker's options skew has shifted toward calls, indicating growing ​demand 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 went from a five-year low in March to a five-year high by mid-May.

AI SECTOR HEDGING

While traders are bullish on Nvidia, increasing hedging and profit-taking across semiconductor stocks and related exchange-traded funds suggest that even the most bullish investors are looking to protect gains after the sector's sharp run-up.

That tension reflects a key dynamic heading in to earnings: investor expectations are high, and ‌the bar for Nvidia, as the semiconductor giant at the heart of ​the AI trade, is rising.

Nvidia's shares have gained 19% this year, while the ​S&P 500 is up 8% year to date and ​the Philadelphia SE Semiconductor Index has risen 57% over the same period.