NVDA Earnings Preview: Nasdaq 100 Vulnerable Ahead of AI Darling Nvidia’s Results

NVDA, Nasdaq 100 Key Points

• NVDA has “beat” analyst estimates in seven of the last eight earnings reports, with the stock rising an average of more than 7%.
• Options traders expect a +/- 11% move in response to Nvidia’s earnings report, a truly staggering move in a $1.8T stock.
• NVDA is seeing its biggest drop of the year so far to trade below its short-term 8-day EMA for the first time in seven weeks

When are Nvidia’s Earnings?

Nvidia reports its Q4 earnings on Wednesday, February 21^st after the market close.

What are Nvidia’s Earnings Expectations

Analysts expect Nvidia to report $4.58 in EPS on $20.6B in revenue.

Nvidia Earnings Preview

One definition of a market darling is “a stock that is often discussed at dinner parties and rarely questioned as a good investment.” By that definition, Nvidia (NVDA) is the quintessential market darling in the current environment.

Positioned at the epicenter of the AI revolution, Nvidia’s stock has quintupled since the start of 2023 as demand for its semiconductors as gone parabolic. Just last week alone, the company saw its market capitalization rise to $1.8T, eclipsing Amazon and Alphabet/Google to become the third most valuable US stock. Now that the rest of the “Magnificent Seven” stocks have reported mostly strong earnings, the big question on traders’ minds is whether Nvidia can continue to deliver exceptional results.

As the graphic below shows, NVDA has “beat” analyst estimates for both earnings (by an average of 14%) and revenues (by an average of 7%) in seven of the last eight earnings reports, with the stock rising an average of more than 7% in response to those results:

Source: Bloomberg

Heading into the week’s release, traders are expecting an even bigger-than-average move, with the implied volatility on options suggesting that we could see a +/- 11% move in response to Nvidia’s earnings report, a truly staggering move in a $1.8T stock.

Beyond the company’s raw results, investors will be particularly keen to see how Nvidia’s CEO Jensen Huang sees demand developing across the rest of the year. Any signs that the AI boom may be slowing could lead to a big bearish reversal in the stock, so traders are justifiably on tenterhooks ahead of the release.

Nvidia Technical Analysis – NVDA Daily Chart

Source: TradingView, StoneX

Technically speaking, NVDA has had an insane start to the year, surging from below $500 on New Year’s Day to an intraday high near $750 last week. As of writing Wednesday morning, NVDA is seeing its biggest drop of the year so far to trade below its short-term 8-day EMA for the first time in seven weeks.

It’s not surprising that some traders may want to take profits ahead of the big earnings report, but the current selling could also be an ominous sign if the results don’t quite meet the high hurdle expected by traders…or if earnings and revenues technically “beat” expectations slightly but the stock fails to see a meaningful rally. After such an impressive rally, even a shallow 38.2% or 50% Fibonacci retracement could take the stock back toward $640 or $610.

Nasdaq 100 Technical Analysis – NDX Daily Chart

Source: TradingView, StoneX

With an elevated 5%+ allocation to NVDA (not to mention the downstream effects of NVDA’s earnings on other semiconductor- and AI-focused names), the Nasdaq 100 may also see a dramatic move in response to this week’s earnings.

Looking at the chart, the Nasdaq 100 is on track to break the bullish trend line off its late-October lows in early trade today, potentially opening the door for a deeper retracement toward the 50-day EMA in the $17K area. At this point, it may take blowout earnings figure from Nvidia to reinvigorate the Nasdaq 100’s fading bullish momentum.

-- Written by Matt Weller, Global Head of Research

Follow Matt on Twitter: @MWellerFX