Nvidia (NVDA) stock remains in focus ahead of the artificial intelligence (AI) behemoth’s fiscal second-quarter earnings scheduled for after market close on Wednesday, Aug. 27.
At the time of writing, options traders are betting on a potential 5.59% move in NVDA shares in either direction after the quarterly print. This expected move is based on options with expiry on Friday, Aug. 29 and is calculated based on 85% of the value of the at-the-money straddle.
The semiconductor stock has averaged a 4.72% move following earnings over the past four quarters. Heading into its Q2 print, Nvidia stock is up more than 100% versus its year-to-date low set in April.
Nvidia stock has pulled back following three of its last four earnings events, and the Q2 release today may not be any different, says Tom Sosnoff, the co-founder of Tastytrade.
According to him, the semiconductor stock is significantly overvalued and due for a breather heading into the quarterly update.
However, there are reasons beyond valuation that could weigh on NVDA shares after the financial release.
For one, management could guide cautiously amidst geopolitical risks to its China business, which could disappoint investors and trigger a meaningful selloff in the AI stock after the earnings release.
If Nvidia shares do indeed retreat following the quarterly update, long-term investors should treat it as an opportunity to load up on them, says Tom Lee, the head of research at Fundstrat Global.
In a recent CNBC interview, Lee said AI remains a strong wind at NVDA’s back, adding it’s “one of the most important companies in the middle of the biggest structural change in the world economy.”
According to him, the artificial intelligence trade is still in its early innings only, especially since “there’s such a limited number of stocks that represent a direct play on AI.”
Despite NVDA shares’ blockbuster performance over the past four months, Wall Street analysts remain bullish as ever on the AI chips giant.
The consensus rating on Nvidia stock currently sits at “strong buy” with the mean target of nearly $200 indicating potential upside of another 10% from here.
