Nvidia Touches a Record as Anticipation Builds for Key Results

Nvidia Corp. shares touched an intraday record on Tuesday, signaling investor optimism ahead of the chipmaker’s highly anticipated earnings report.

(Bloomberg) — Nvidia Corp. shares touched an intraday record on Tuesday, signaling investor optimism ahead of the chipmaker’s highly anticipated earnings report.

Shares climbed as much as 2.6% to hit an all-time intraday high of $481.87, though they are down 1.7% as of 11:21 a.m. New York time. The stock is up more than 14% off a low hit earlier this month, and has surged 220% this year, making it by far the biggest gainer among constituents of the S&P 500 Index. The Philadelphia Stock Exchange Semiconductor Index is up 41% in 2023.

In a sign of how significant Wednesday’s report will be, the options market is bracing for a move of 9.8% following the results. With Nvidia accounting for nearly 3.2% of the S&P 500 — a record-high weight for the company — the stock’s move will have broader implications. 

Of the ten largest companies in the S&P 500, Nvidia is the only stock for which the price of call options — which are desirable if the stock goes up — is higher than put options, according to data from Nations Indexes.

“It tells me that people are still scrambling to buy calls in Nvidia,” said Scott Nations, president of Nations Indexes. “They still want upside much more than they’re worried about downside protection. That is an outlier in the biggest names in the S&P.”

The rally reflects optimism over artificial intelligence, which Nvidia is a key player in, and the record its shares hit is the latest example of how investors are piling into the stock ahead of second-quarter results due after the market closes on Wednesday. 

Nvidia gained 8.5% on Monday as analysts raised their price targets and expressed optimism that the report will show massive demand for the chips used to process AI services. Generative AI services like ChatGPT were thrust into the spotlight earlier this year and the excitement surrounding artificial intelligence applications lifted a number of megacap technology and internet stocks. 

Last quarter, Nvidia gave a forecast that was far stronger than expected, cementing its status as a primary beneficiary of AI spending. The upcoming report will provide new details on whether demand is holding up enough to justify the stock’s surge. Revenue is seen rising 65% from the year-ago period, according to data compiled by Bloomberg. 

Investors are “looking for continued outsized growth despite supply constraints” for graphics processing units and will want to see “a timeline for supply-demand balance regarding GPUs and AI demand,” according to WestPark Capital. 

Nvidia’s year-to-date rally has resulted in a lofty valuation. The stock trades at roughly 45 times estimated earnings, above its 10-year average of 32, as well as at 21.4 times estimated sales. The Nasdaq 100 Index trades under four times estimated sales.

(Updates second paragraph with latest trading.)

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