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Posted May 28, 2025 at 12:50 pm
I try to avoid hyperbole, but I don’t think it’s an exaggeration to say that Nvidia (NVDA) earnings are the most consequential report of any given quarter. It is no coincidence that the recent bull market run started in late 2022, almost exactly coinciding with the release of ChatGPT. Enthusiasm about artificial intelligence has been powering tech stocks, and thus the US market, ever since. And no stock has epitomized the AI gold rush more than NVDA.
Quite frankly, if any company has deserved this much attention, it’s NVDA. The fundamentals, some of which are portrayed below, paint a truly astounding track record of growth and profitability:
Source: Interactive Brokers
If there is a potential problem with NVDA, it is whether it will be a victim of its own success. Expectations are lofty – though not oppressively so – and it is difficult to expect a company with a $3.3 trillion market cap to continue to grow exponentially. If the company reports or expects only linear or modest growth, will investors find that sufficient?
Analysts are expecting $0.93 this quarter on revenues of $43 billion. That would imply a 52% jump in year-over-year quarterly earnings but “only” 4.5% more than the prior quarter. The EPS growth is expected to continue at roughly a 30% clip in the coming year. We will know soon enough if Jensen Huang can confirm that is likely to occur.
Traders seem reasonably confident that the company will not offer a negative surprise, though there is some caution priced into NVDA options. The IBKR Probability Lab for options expiring on Friday shows a generally symmetrical profile, though the peak outcome is in the $133-134 range, slightly below the current $136 price.
Source: Interactive Brokers
Skews for near-dated options are generally flat for strikes +/-10% around the current price, but we see a fairly steep skew for options below $120. Considering that the stock went somewhat vertical after breaking above $120 about two weeks ago, it seems reasonable for traders to hedge against a dip below that level. The chart also shows that at-money options imply a daily volatility of 7% between now and Friday. That is reasonably commensurate with the recent average of post-earnings moves for NVDA (7.2%), though there is quite a bit of dispersion among them (-8.48%, +0.53%, -6.38%, +9.32%, +16.40%, -2.46%)
Source: Interactive Brokers
Source: Interactive Brokers
Bottom line: options market expectations appear reasonable for such a widely followed stock. The rest is up to the company and its management.
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Sorry, but this company is not deserving of having a $3,000,000,000,000 valuation, let alone being the most valuable company on the planet. 3X the market cap of Berkshire Hathaway? Berkshire Hathaway EBITDA 116 Billion, Nvidia EBITDA 83 Billion (trailing 12 months.) It has yet to close above $150. $160 would be a 4 Trillion market cap, $200 would be a 5 Trillion market cap. NOT GOING TO HAPPEN. I am hoping it makes a new high, I will sell December $200 calls which will expire worthless.
Stop clogging up my iPhone. I have no interest in working with you. If you continue to send me emails you will regret it.