Wall Street is closely monitoring the earnings report of the semiconductor behemoth, amidst speculation regarding its substantial stock market valuation driven by the surge in artificial intelligence.
Investors Prepare for Potential Market Volatility
The chip giant Nvidia’s stock price has steadily ascended in the past eighteen months, fueled by investors’ optimism regarding the revolutionary impact of artificial intelligence and the company’s high-performance semiconductors that drive this technology forward.
However, recently, Nvidia briefly claimed the position of the third most valuable publicly listed company in the U.S., only to retreat to the fifth spot. The upcoming announcement of Nvidia’s latest quarterly earnings on Wednesday will be a significant moment, with billions of dollars of investor funds at stake.
Anticipate Significant Market Movement. Following a remarkable over 100% surge in the stock price since May due to soaring demand for Nvidia’s chips, investors are pondering whether the peak is near. Wall Street’s sentiment appears mixed: as per Bloomberg, options traders have heavily engaged in both put options, which gain value as a stock’s price declines, and call options. This indicates that Nvidia’s market cap could fluctuate by approximately $180 billion on Wednesday.
These positions “imply that the market anticipates a 10.5 percent swing in either direction post-results, so be prepared for potential market turbulence in either scenario,” noted Jim Reid, a strategist at Deutsche Bank, in a communication to investors on Wednesday.
This follows Tuesday’s market correction, which erased $78 billion in Nvidia’s market capitalization. It is essential to note that Nvidia has emerged as one of the largest constituents of the S&P 500, making it a widely held stock. The decline in Nvidia’s shares contributed to dragging the index into negative territory on Tuesday, underscoring Nvidia’s influence on the market.
Key Points to Monitor: Analysts project that Nvidia’s fourth-quarter sales have more than tripled compared to the previous year, with net earnings for the year increasing nearly sevenfold, driven by the robust performance of the company’s data center segment and the strong demand for its semiconductor products.
