Nvidia shares rose slightly ahead of its highly anticipated first-quarter earnings report on Wednesday, with the stock up roughly 20% since its previous results. Options traders are pricing in a $355 billion swing in market value following the announcement, an implied move of about 6.5% in either direction. With a current market capitalization of $5.4 trillion, an 11.5% gain would make Nvidia the first company to reach a $6 trillion valuation.
Investor sentiment shifts
Despite long-standing fears regarding the sustainability of AI capital expenditure, the market has become more sanguine about Nvidia's growth. Options data shows a shift toward calls, indicating traders are increasingly paying for upside exposure rather than just downside protection. This optimism follows a stagnation period in March when the stock briefly traded at a cheaper forward valuation than the S&P 500.
- Revenue scale. Nvidia previously reported full-year revenue of $215.9 billion and net income of $120.1 billion.
- Order book. CEO Jensen Huang recently doubled guidance, forecasting $1 trillion in orders for Blackwell and Rubin chips through 2027.
- Market context. The Philadelphia SE Semiconductor Index has risen 57% year to date, outperforming the S&P 500’s 8% gain.
Customer spending risks
The pressure. While hyperscalers like Amazon and Oracle continue to pour money into AI chips, they are reporting negative free cash flow as spending exceeds cash from operations. This places immense pressure on these firms to prove that the infrastructure cycle will yield a return on investment. Additionally, Alphabet’s Google Cloud and Amazon Web Services are scaling custom-designed chips to reduce reliance on expensive GPUs.
Beyond customer budgets, Nvidia faces regulatory hurdles including U.S. trade restrictions that could limit its access to the Chinese market. Investors are now watching for specific signals on data center demand and forward guidance to see if the company can sustain its current trajectory. Nvidia’s first-quarter fiscal 2027 earnings call begins May 20.
