Nvidia earnings could cause nearly $300 billion in stock volatility, Goldman says

• Nvidia stock could see a $298 billion swing in market value after its second-quarter earnings report.

• Goldman Sachs notes that options pricing data suggest a potential 9% move in Nvidia stock in either direction.

• “The upside for Nvidia this earnings season is much lower than it has been in recent quarters,” Goldman said.

Nvidia stock could see a massive $298 billion swing in market value after it reports its second-quarter earnings results on Wednesday.

That estimate is based on recent options pricing data, according to a Monday note from Goldman Sachs’ trading desk.

The potential change in market value in either direction would equate to a more than 9% move in the $3.17 trillion chip maker’s share price.

Nvidia holds the record for the largest one-day change in market value at $330 billion, which occurred in late July when the stock rebounded from a painful week-long slide.

According to the bank, if the company can report a solid quarter of growth with even stronger guidance, it could catch the stock market by surprise and lead to a big move.

“Can you imagine if NVDA beats expectations on Wednesday?” asked Goldman Sachs’ trading desk, led by managing director Scott Rubner.

“IT was net sold for the 4th consecutive week (13 of last 16) and saw its largest net sell in 2 months as the sector was net sold in every region, driven by both long selling and of short sales. The main book is now underweight Info Tech to the MSCI World Index by -9.7% – the lowest level on record,” explained Rubner.

In other words, stock market positioning suggests that most investors could be caught off guard if Nvidia pulls higher after its earnings results on Wednesday.

“The lift for Nvidia this earnings season is much lower than it has been in recent quarters, given the fundamental sales in the technology,” Rubner said.

Nvidia is currently the second largest company in S&P 500, with a share of around 6.5%, so its results could have a big impact on the wider market.

In fact, Interactive Brokers strategist Steve Sosnick emphasized how integral Nvidia is to the rest of the market.

In a note on Tuesday, Sosnick analyzed the 25 most active trades on the Interactive Brokers platform, and more than 70% of them have a connection to Nvidia.

The top spot belongs to Nvidia, followed by Tesla, which is a key customer of the chip company. AMD, Nvidia’s closest competitor, is number three, and number four is a semiconductor ETF.

Overall, among the top 25 most active trades at Interactive Brokers, Nvidia is connected to 18 names, according to Sosnick.

The story continues

“We’ve grown accustomed to seeing NVDA at the top of the chart most weeks, cementing its key role in investor psychology. Looking beyond that, it’s pretty clear that the company plays a crucial role, affecting a wide range of other popular investment vehicles.” Sosnick said.

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