Nvidia Q3 Earnings: What the Options Market is Expecting

As Nvidia Corporation (NVDA) prepares to release its Q3 earnings, the options market is abuzz with anticipation. The tech giant's earnings are closely watched as a bellwether for the AI and technology sectors, and investors are positioning themselves accordingly. In this article, we'll delve into the options market's expectations for Nvidia's post-earnings price movement and explore the factors driving this sentiment.

The options market is anticipating a significant swing in Nvidia's market value following its Q3 earnings, with an 8.5% swing in either direction. This expected move is in line with previous post-earnings swings and could result in a nearly $300 billion change in Nvidia's market cap, which has grown to $3.44 trillion. Larger-than-expected moves in Nvidia's stock price have typically been to the upside, with five out of the last 12 quarters seeing outsized moves. However, post-earnings moves have often undershot market expectations.

Traders are assigning a slightly higher probability to an outsized move to the upside than to the downside, according to Susquehanna Financial Group strategist Christopher Jacobson. Investors will be watching for updates on Nvidia's Blackwell AI chip shipments and guidance for Q4, which will include sales of the next-generation AI processor.

Analysts' earnings estimates and guidance play a crucial role in shaping options traders' expectations for Nvidia's post-earnings price movement. In the case of Nvidia's Q3 earnings, analysts expect the company to report revenue growth driven by demand for AI infrastructure, with record data center sales. They forecast revenue of $33.28 billion and net income of $17.45 billion or 70 cents per share, up from $9.24 billion or 37 cents per share a year earlier. These estimates reflect the strong growth and dominance of Nvidia in the AI chip market.



Options traders are primed for an 8.5% swing in Nvidia's shares following the results, which could translate to a nearly $300-billion swing in the company's market value. This expected move is in line with previous percentage moves following results over the last 12 quarters. However, post-earnings moves in Nvidia's shares have typically undershot market expectations, and larger-than-expected moves have tended to be to the upside. Therefore, options traders may be assigning a slightly higher probability to an outsized move to the upside than to the downside.

Nvidia's earnings are closely watched as a bellwether for the AI and technology sectors, with investors likely to extrapolate the company's performance to the broader market. The market will be particularly focused on Nvidia's guidance for the fourth quarter, which will be the first to include sales of the company's next-generation AI processor, Blackwell. Analysts are modeling earnings of 75 cents a share on sales of $33.15 billion for the third quarter, with expectations for the fourth quarter set at 82 cents a share on sales of $37.09 billion. Nvidia has bested lofty Wall Street revenue expectations for the past eight quarters, but analysts are expecting a slower pace of growth this time. Investors will be watching how Nvidia overcomes delays and supply-chain issues, as well as updates on Blackwell shipments, to determine the stock's post-earnings price movement.

In conclusion, the options market is anticipating a significant swing in Nvidia's market value following its Q3 earnings, with an 8.5% swing in either direction. This expected move is in line with previous post-earnings swings and could result in a nearly $300 billion change in Nvidia's market cap. Analysts' earnings estimates and guidance, as well as the overall AI market sentiment, are crucial factors driving the anticipated market cap swing for Nvidia. The chipmaker's Q3 results could significantly impact the broader AI trade and the market's trajectory, as investors await updates on Blackwell AI chip shipments and guidance for Q4.