Nvidia's Sudden 3.18% Drop: Oracle's Earnings Shockwave or AI Bubble Alarm?

Summary
• Nvidia (NVDA) plunges 3.18% to $177.93, its worst intraday drop since October 2025
• Oracle's $16.06B revenue miss sparks sector-wide selloff, dragging down AMD (-3.05%) and Microsoft (-0.9%)
• Options market frenzy: 2025-12-19 put options at $167.5 strike see 61% price surge
• The stock trades 3.7% below its 52-week high of $212.19, testing critical support at $176.62

Today’s selloff in Nvidia, the AI sector’s crown jewel, has ignited a firestorm of speculation. Oracle’s underwhelming earnings report—coupled with its $50B capital spending hike—has triggered a reevaluation of AI infrastructure spending. With the stock trading near its 200-day moving average of $155.55, traders are scrambling to decipher whether this is a buying opportunity or a warning shot in the AI bubble debate.

Oracle's Earnings Miss Sparks AI Sector Reassessment
Nvidia’s sharp decline stems directly from Oracle’s earnings report, which revealed $16.06B in quarterly revenue—$150M below estimates—amid a $50B capital spending increase. As a major buyer of Nvidia’s data center GPUs, Oracle’s mixed results have triggered fears of overextended AI infrastructure spending. The market is now questioning whether the $4.34T valuation of AI leaders like Nvidia can withstand a potential slowdown in cloud provider demand. This selloff mirrors past AI sector corrections, where over-optimism about adoption rates led to sharp repricing.

Semiconductor Sector Suffers Broad Selloff as AI Hype Fades
The semiconductor sector is underperforming, with AMD (-3.05%) and Broadcom (-2.46%) joining Nvidia in decline. Oracle’s 12.8% drop has amplified sector weakness, as investors reassess AI infrastructure spending. While TSMC (-2.35%) holds up relatively well, the broader S&P 500 Tech Index (-0.63%) reflects growing caution. This synchronized selloff suggests the market is pricing in a potential slowdown in AI-driven demand, particularly as cloud providers face margin pressures.

Options Playbook: Capitalizing on Volatility with Put Options and ETFs
• 200-day MA: $155.55 (below current price)
• RSI: 46.37 (oversold territory)
• MACD: -1.35 (bearish divergence)
• Bollinger Bands: $174.74 (lower band) to $191.62 (upper band)

Key levels to watch: The $176.62 intraday low forms immediate support, while the 200-day MA at $155.55 represents a critical psychological threshold. Short-term traders should monitor the 52-week low of $86.62 as a final line of defense. The leveraged ETF NVDB (-6.44%) and NVIT (-3.03%) offer amplified exposure to a potential rebound, but their steep declines highlight the sector’s fragility.

Top Options:
• NVDA20251219P167.5
- Put Option, Strike: $167.5, Expiry: 2025-12-19
- IV: 41.08% (high volatility)
- LVR: 148.73% (high leverage)
- Delta: -0.15386 (moderate sensitivity)
- Theta: -0.02195 (moderate time decay)
- Gamma: 0.02061 (high sensitivity to price moves)
- Turnover: $273,021 (liquid)
- Payoff at 5% downside: $11.25 (max profit if price drops to $169.03)
- This put option offers a compelling risk/reward profile, with high leverage and liquidity to capitalize on a potential breakdown below $170.

• NVDA20251219P170
- Put Option, Strike: $170, Expiry: 2025-12-19
- IV: 40.08% (high volatility)
- LVR: 130.18% (high leverage)
- Delta: -0.20937 (strong sensitivity)
- Theta: -0.00265 (minimal time decay)
- Gamma: 0.02563 (high sensitivity to price moves)
- Turnover: $1.687M (highly liquid)
- Payoff at 5% downside: $11.03 (max profit if price drops to $169.03)
- This deep-in-the-money put offers downside protection with minimal time decay, ideal for a prolonged bearish move.

If $170 breaks, NVDA20251219P170 offers a high-probability short-side trade. Aggressive bulls may consider NVDA20251219C169 into a bounce above $170.

Backtest Nvidia Stock Performance
The backtest of NVDA's performance after a -3% intraday plunge from 2022 to the present shows favorable results. The 3-Day win rate is 61.56%, the 10-Day win rate is 61.11%, and the 30-Day win rate is 68.00%, indicating a higher probability of positive returns in the short term. The maximum return during the backtest was 15.50% over 30 days, suggesting that NVDA can generate substantial gains even after a significant intraday drop.

AI Sector at Inflection Point: Buy the Dip or Sell the Bubble?
The selloff in Nvidia and the broader semiconductor sector marks a critical juncture in the AI trade. With Oracle’s earnings miss exposing vulnerabilities in the AI infrastructure narrative, investors must weigh whether this is a buying opportunity or a warning shot. The 200-day MA at $155.55 and the 52-week low of $86.62 are key levels to monitor. Sector leader AMD (-3.05%) could provide further insight into market sentiment. For now, the leveraged ETF NVDB (-6.44%) and the put options at $167.5 and $170 strikes offer the most compelling risk/reward profiles. Watch for a breakdown below $170 or a rebound above $180.42 to determine the next move.