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Investors and speculators are gearing up for Nvidia Corp.‘s (NASDAQ:NVDA) earnings report on Wednesday, an event that’s expected to send ripples, if not tidal waves, across the U.S. stock market.
If the choices market is true, Nvidia’s results could spark moves within the S&P 500 index – as tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY) – larger than those typically triggered by key economic data just like the employment and inflation reports.
Nvidia’s dominance within the AI-driven technology trade has turned its earnings right into a barometer for overall market sentiment, and its influence on the stock market is unparalleled.
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Over the past 12 months, Nvidia accounted for 20% of the S&P 500’s total returns and Bank of America’s derivatives analyst Gonzalo Asis didn’t mince words: “It stays probably the most dominant stock available in the market… expected to drive nearly 25% of the S&P 500’s EPS growth in 3Q.”
In essence, whether Nvidia beats or misses expectations, the ripple effects will likely extend far beyond its ticker.
The choices market implies a possible 1.05% move within the S&P 500—higher than what traders expect from next month’s Non-Farm Payroll (NFP) data, Consumer Price Index (CPI) print, and in step with the Federal Reserve’s December meeting.
“Options are assigning more broad-market risk around NVDA earnings than around next month’s NFP and CPI days, and as much because the Dec FOMC,” the analyst noted.
For Nvidia shares themselves, the implied one-day move is much more eye-popping: 12.5%.
“We remain cautious of fragility risks in single names around earnings, but NVDA hedges themselves will not be particularly low cost relative to how much the stock has reacted to ends in the last two years,” Assis wrote.
The analyst also warned that the recent easing of post-election euphoria and heightened single-stock fragility may be reasons for traders to hedge against potential market turbulence if Nvidia disappoints.
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