Nvidia Stock: Earnings Report Market Test

Nvidia Stock Faces Market Test Amid Earnings Report

Nvidia stock is bracing for potential volatility as the company prepares to release its quarterly earnings report on May 28. Options traders are anticipating a 7.4% swing in the stock price, a more subdued movement compared to the average 11.3% fluctuation observed over the past eight quarters. This report comes at a critical time for Nvidia, following a year marked by AI advancements and shifting trade dynamics.

Volatility Expectations

The projected 7.4% swing in Nvidia's stock price reflects a relatively calmer market reaction compared to previous earnings reports. In February, despite exceeding earnings expectations, Nvidia's shares dropped 8.5% due to a cautious outlook on first-quarter gross margins. This led to an 11.4% trading range the following day, highlighting the stock's sensitivity to earnings reports.

Options traders are preparing for various scenarios on May 29, with potential outcomes including a 5.4% increase alongside a 2% decrease or a 4% drop with a 3.4% rise. These projections underscore the uncertainty surrounding Nvidia's earnings report but also suggest a more stable market response compared to previous quarters.

Long-Term Investor Gains

Despite short-term volatility, long-term investors in Nvidia have seen substantial returns. Over the past decade, shareholders who purchased Nvidia stock before earnings reports and held them for 12 months have experienced an almost 120% median return, according to Yahoo Finance data. This trend highlights the company's strong performance and resilience in the face of market fluctuations.

AI Developments and Trade Policies

Nvidia's earnings report follows a year of significant developments in the AI sector, particularly in China. The emergence of a new AI model from Chinese startup DeepSeek raised concerns about AI spending by major tech companies, including Nvidia's key customer, Microsoft. These concerns, coupled with indications of a slowdown in AI data center investments, contributed to Nvidia's stock struggles earlier this year.

Trade policies have also played a significant role in shaping Nvidia's stock performance. President Trump's trade war with China, including a ban on exports of Nvidia's specialized chips, has negatively impacted the company. However, recent developments such as a temporary trade truce and Nvidia's expansion into Saudi Arabia have provided a boost to the stock ahead of the earnings report.

Revenue and Earnings Projections

Analysts expect Nvidia to report significant earnings and revenue for its fiscal 2026 first quarter, though growth is projected to slow. Revenue is forecasted to increase by over 66% to $43 billion, with adjusted earnings per share rising by 44% to $0.88. These projections follow a year of exceptional growth, with Nvidia reporting a 262% increase in revenue and a 461% increase in earnings per share in the previous year's first quarter.

Investors will be closely monitoring the impact of Trump's ban on Nvidia's chip sales to China, which CEO Jensen Huang has stated cost the company $15 billion in sales. This policy, along with broader trade dynamics, will likely influence Nvidia's stock performance following the earnings report.

Conclusion

Nvidia's upcoming earnings report on May 28 will serve as a critical test for the company's stock, with options traders predicting a 7.4% swing. As AI developments and trade policies continue to shape the market, investors will be watching closely to assess Nvidia's future trajectory and the broader implications for the tech industry.