Nvidia is preparing for a possible $260 billion jolt to its market value as Wall Street positions itself ahead of the chipmaker’s second-quarter earnings, due Wednesday after the U.S. market closes.
Options data show traders expect the stock to swing about 6% in either direction once the results are out. While lower than its long-term average of 7%, the projection shows investors may feel more confident about Nvidia’s direction after months of massive gains.
Chris Murphy, co-head of derivatives strategy at Susquehanna, believes the company’s influence stretches beyond its own stock. “The ripples out of Nvidia might be more interesting than the actual move for Nvidia. A lot of these really high-flyer, speculative AI names have come off a lot, but Nvidia is basically back right below its all-time high.”
However, the results will test investor sentiment and also weigh heavily on how the company scales its increasingly fraught relationship with China.
Nvidia recently struck a deal with Washington requiring it to share 15% of revenue from China in exchange for export licenses. The move has been criticised at home and complicated abroad, as Beijing urges local firms to cut back on orders over security concerns.
Reports show Nvidia has asked some suppliers to pause production of its China-specific H20 chips, while at the same time designing a more advanced processor for the market.
Jamie Meyers, senior analyst at Laffer Tengler Investments, noted that: “We’ve got to get clarity on these two governments first, whether China wants the chips and whether the administration is going to allow it. And if so, how is that going to work?”
China accounted for 13% of Nvidia’s revenue last year. But given that U.S. approval for certain chip exports came late in the quarter and Beijing’s objection is still unresolved, analysts are reluctant to price in meaningful revenue from H20 shipments.
Nvidia itself had warned in May that U.S. curbs would slash about $8 billion from its July-quarter sales, forcing a $4.5 billion charge in the previous period.
Despite these issues, demand for Nvidia’s chips from global tech giants including Meta and Microsoft remains strong, keeping the AI chip market hot. Analysts expect Nvidia to post a 53.2% revenue jump to $46.02 billion for the quarter, though that is far below the triple-digit growth rates that once defined its surge.
CEO Jensen Huang’s comments will be highly monitored, especially given recent market jitters that AI stocks may be overpriced. Nvidia shares have risen more than 34% this year, outpacing both the chip index and the S&P 500, but the momentum has cooled compared with the past two years.
Analysts see Nvidia guiding third-quarter revenue to about $52.96 billion, up 51% year-on-year. Piper Sandler estimates roughly $6 billion could come from China, though margins will take a hit.
Bernstein projects that the U.S. revenue-sharing deal could shave one percentage point off Nvidia’s overall profitability, contributing to an expected drop in adjusted gross margin from 76% to 72.1% this quarter.
Matt Amberson, founder of ORATS, spoke on Nvidia’s recent course: “It’s just a Goldilocks time for Nvidia.”
