The broad market indexes have surged since the April lows, driven largely by a handful of technology and AI stocks. Among the leaders is Nvidia Corp. (NVDA), climbing nearly 40% from the April lows. Here’s what traders should watch ahead of its earnings, says Lance Roberts, editor of the Bull Bear Report.
Given its leadership role and massive market cap, it could spark volatility in the stock – as well as in many of the technology stocks that have driven the strong bullish uptrend. The bullish case is well discussed in the media. AI infrastructure spending from the hyperscalers remains robust, and NVDA’s data center revenue will consistently exceed expectations.
Nvidia Corp. (NVDA)
As is the norm with NVDA, they will likely beat expectations, and the market’s primary focus will be on their forward guidance. But the gamma setup is extreme. In fact, S&P 500 Index (^SPX) gamma exposure has surged to one of the highest levels since 2021. A disappointment from NVDA could trigger an unwind of the gamma squeeze.
Last Friday’s semiconductor pullback finally landed a real punch on the chip complex. After running roughly 70% year-to-date, the VanEck Vectors Semiconductor ETF (SMH) gave back 3.8% to close at $556.34. NVDA fell 4.4%. The selling wasn’t subtle. It was the kind of session that grabs your attention after weeks of one-way price action.
So, here’s the question every momentum trader is wrestling with. Is this the end of the chase, or just a pause ahead of the catalyst?
Options are pricing in a close-to-8.6% move post earnings for NVDA, which tells you how loaded the setup is. A clean beat with strong forward guidance on data center capex re-arms the bulls and likely extends the trend through summer. A miss, or softer guidance, hands the bears the story they’ve been pitching for six months.
For now, this looks like a breather, not a top. However, after a 70% ramp, “breather” can still mean another 10% to 15% pullback before real buyers reappear. Position accordingly into the print, and don’t confuse two days of price action for a thesis.
