Nvidia (NVDA) Faces Market Volatility as Options Traders Brace for AI Disruption and Earnings Shock
Nvidia Corp. (NASDAQ: NVDA) is at the center of Wall Street’s attention as options traders ramp up bets on heightened volatility ahead of the company’s earnings report and the highly anticipated GTC AI conference. After last week’s DeepSeek-triggered selloff, concerns about the emergence of cheaper AI models have ignited fears of a potential decline in high-end GPU demand, leading to sharp market swings.
Options Traders Position for Massive Nvidia Moves
The options market is showing signs of intense hedging activity, with both bullish and bearish traders piling into Nvidia’s March contracts. According to data compiled by Bloomberg, open interest in puts and calls surged by over 1 million contracts, signaling that investors are actively bracing for volatility.
On Thursday, options traders relentlessly purchased bearish puts on Nvidia’s stock, particularly at $118, $120, and $122 strike prices for March expirations, according to Susquehanna International Group’s Chris Murphy. These contracts provide protection not just for Nvidia’s February 26 earnings report but also for major market-moving events, including the GTC AI conference (March 17-21) and the Federal Reserve’s interest rate decision on March 19.
With Nvidia’s stock already experiencing its worst weekly loss since September 2022, the sharp dip below its 200-day moving average raises concerns of further downside pressure if selling accelerates.
Implied Volatility Spikes as Traders Brace for a 9.8% Earnings Move
Before last week’s DeepSeek-induced drop, the market was pricing in a 7.8% one-day move for Nvidia’s upcoming earnings. Now, options are implying a 9.8% post-earnings move, the largest swing in a year. This reflects growing uncertainty about Nvidia’s near-term trajectory as investors debate the long-term impact of AI hardware spending shifts.
RBC Capital Markets strategist Amy Wu Silverman noted that Nvidia’s options skew remains elevated, suggesting that investors continue to seek downside protection despite renewed buying activity.
DeepSeek Disrupts AI Market, Threatening Nvidia’s GPU Dominance
The latest shock to Nvidia’s stock came from the rise of DeepSeek, a Chinese AI startup developing cost-effective AI models that could potentially reduce demand for Nvidia’s expensive GPUs. If DeepSeek’s approach gains traction, other AI firms may follow suit, shifting demand away from Nvidia’s hardware toward custom AI chips produced by rivals like Broadcom Inc. (NASDAQ: AVGO) and Marvell Technology Inc. (NASDAQ: MRVL), according to Jon Zauderer of Citigroup Global Markets.
This disruption has fueled broader volatility across semiconductor stocks, with hedging costs in the VanEck Semiconductor ETF (SMH) jumping to their highest level since September.
Buy-the-Dip Interest Emerges Amid Nvidia’s Sharp Pullback
Despite last week’s turbulence, dip buyers rushed in, helping Nvidia recover part of its losses. Steve Sosnick, chief strategist at Interactive Brokers, noted that Nvidia saw one of the largest buy-versus-sell imbalances in recent memory, underscoring investors’ belief in its long-term AI leadership.
As the market awaits Nvidia’s earnings report and Jensen Huang’s keynote at the GTC AI conference, traders are preparing for another round of dramatic price swings in one of the most influential stocks on Wall Street.
