Why Nvidia’s Earnings Could Spark Significant S&P 500 Volatility
As investors gear up for Nvidia Corp.’s (NASDAQ: NVDA) upcoming earnings report, scheduled for Wednesday, the stakes are higher than ever. Nvidia’s performance is anticipated to create significant waves in the U.S. stock market, potentially more impactful than critical economic data releases such as employment and inflation reports.
Nvidia’s Role in the Market
Nvidia has emerged as a powerhouse in the AI-driven technology sector, and its earnings report has become a vital indicator of overall market sentiment. Over the past year, Nvidia contributed to 20% of the total returns for the S&P 500, and according to Bank of America’s derivatives analyst Gonazalo Asis, the company is set to account for nearly 25% of the S&P 500’s earnings per share (EPS) growth in the third quarter. Its influence is unmatched, making the upcoming report a closely watched event.
Market Implications
The options market predicts a potential 1.05% move in the S&P 500 following Nvidia’s earnings—this is notably higher than what traders expect from the next Non-Farm Payroll (NFP) data and the Consumer Price Index (CPI) release. Moreover, the anticipated move is on par with reactions expected around the Federal Reserve’s December meetings. This indicates that options traders are assigning significantly more risk to Nvidia’s earnings than to these other crucial economic markers.
If we turn our attention to Nvidia itself, market expectations suggest an implied move of around 12.5% in its share price. While this steep fluctuation reflects strong investor sentiment, it also indicates the fragility surrounding individual stocks during earnings season.
Hedging Strategies
With such volatility expected, traders are being urged to hedge against potential market turbulence. One suggested strategy is to implement put spreads on the Nasdaq-100 ETF, the Invesco QQQ Trust (NASDAQ: QQQ). For example, the QQQ 22Nov 490-480 put spreads are currently priced at $2, potentially offering a fivefold return if the Nasdaq-100 experiences a loss of roughly 3.3% this week.
Despite the potential need for hedges, caution is warranted. The cost of hedging Nvidia earnings is considered expensive, especially in light of how the stock has reacted to past earnings reports.
Historical Performance Insights
Considering Nvidia’s recent earnings history, it is noteworthy that the company has surpassed EPS expectations in 10 out of the last 12 quarters and has missed revenue expectations only once. On average, the stock price fluctuated by approximately 5.3% the day following its earnings announcements. The highest single-day gain came after the Q1 2024 earnings report, where shares rose by an impressive 24.4%. In contrast, the most severe decline during this period occurred after the Q4 2024 results, leading to a drop of 7.6%.
Earnings Performance Snapshot:
| Fiscal Quarter | Date Announced | Surprise % EPS | Surprise % Revenue | 1-Day % NVDA Move |
|---|---|---|---|---|
| Q2-2025 | 8/28/24 | 6.25% | 4.73% | -6.38% |
| Q1-2025 | 5/22/24 | 2.86% | 5.66% | 9.32% |
| Q4-2024 | 2/21/24 | 11.45% | 7.19% | 16.40% |
| Q3-2024 | 11/21/23 | 19.64% | 12.39% | -2.46% |
| Q2-2024 | 8/23/23 | 29.19% | 20.38% | 0.10% |
| Q1-2024 | 5/24/23 | 18.48% | 10.31% | 24.37% |
(Data Source: Benzinga Pro)
Conclusion
The upcoming Nvidia earnings report is set to have significant implications not just for the company but also for the broader S&P 500 index. With substantial market risk anticipated, traders may need to adopt proactive hedging strategies. As Nvidia continues to shape the landscape of AI technology, its performance will remain a focal point for investors looking to navigate the choppy waters of financial markets.
Stay informed and strategically prepared as we continue to monitor the evolving narratives around Nvidia and the broader implications for the market. Our mission at Extreme Investor Network is to equip you with high-value insights that empower your investment decisions.