NVIDIA's stock experienced a sharp downturn as traders significantly sold off call options following a recent peak, marking the first such dip since November. Chris Murphy from Susquehanna International Group noted about 200,000 call options with a $140 strike expiring on January 17 and 600,000 to 700,000 options with strikes ranging from $159 to $165 expiring on February 21 were largely sold off during this volatile day.
The company's recent announcement of broad new products failed to elevate NVIDIA, despite high anticipations set by its presentation at the Consumer Electronics Show (CES) by CEO Jensen Huang. Although NVIDIA's financial outlook seems strong in the long term due to its revolutionary AI chip developments, analysts like those from Stifel Financial highlighted that the short-term benefits appeared to be overstated, leading to a significant change in investor sentiment.
On Tuesday, NVIDIA's stock plunged by 6.2% to $140.14, reversing the 3.4% gain witnessed a day earlier and marking its most substantial one-day drop in four months. This downturn highlights the volatility in investor expectations and the impact of profitable opportunities being rapidly re-evaluated, particularly in the options market where implied volatility on call options took a notable hit relative to bearish put options, a shift from their earlier equal footing.
The market's cautious reception was compounded by NVIDIA's presentation at CES, despite its unveiling of pioneering technologies. The address outlined ambitious AI strategies and strategic partnerships with major firms like Toyota; however, specifics on its most lucrative AI model-training chips were sparse. This perceived gap in immediate growth potential saw investors locking in gains, shifting focus despite NVIDIA's long-term innovations promise.
Brent Kochuba from SpotGamma remarked on the sharp increase in skew implying that call options were vigorously traded up, yet met with accelerated selling, marking the most significant dropoff seen in a month. This underscores not only the nervous market response to new data but also the inherent complexities and aggressive recalibrations within tech stocks as investor sentiments swiftly adjust to new information.