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Q2 Earnings: Can Nvidia's 3000% Rally Continue?
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Earning Preview
Nvidia is set to release its second-quarter 2025 earnings on August 28, with analysts expecting adjusted earnings of 64 cents per share on $28.5 billion in revenue, more than doubling from the previous year's 27 cents per share on $13.51 billion.
Nvidia has consistently beaten earnings and revenue estimates over the past four quarters, though the magnitude of these beats has been decreasing. Investors will look for updates on the Blackwell ramp, which is expected to generate significant revenue, and Nvidia's strong position in AI-related infrastructure spending. The company remains a market leader in AI chips, with demand for its Hopper and Blackwell platforms outpacing supply. Additional insights may be provided on the new Spectrum-X Ethernet networking solution, Sovereign AI, Omniverse industrial digitalization, and the automotive business, including Nvidia Drive Thor and Orin. Updates on Nvidia's sales in China will also be closely watched.
Price Action
Nvidia has seen an impressive rally of nearly 3,000% over the past five years. However, its shares recently declined by almost 23% from mid-July to early August, closing at $98.91 on August 7. This selloff was triggered by fears of potential cuts in AI spending by major tech customers and rumoured delays in the Blackwell GPU rollout. The decline was further exacerbated by high-profile investment funds reducing their stakes and negative predictions about Nvidia's stock. Since then, the stock has rebounded strongly, rising over 30% to close at $130 on August 19 in anticipation of Fed rate cuts and improving US data. As Nvidia prepares to release its second-quarter earnings on August 28, investors are questioning whether it's time to sell.
Trade Inspiration
Earnings exceed expectations – It could be bullish for the AI/ semiconductor sector if Nvidia rallies on the back of their earnings. You can gain inspiration to this sector by referring to thematic stocks or ETFs here.
Earnings below expectations - If Nvidia's earnings fall short of expectations or if their guidance is weak, we may observe increased volatility in the AI and semiconductor sectors, which could potentially impact the broader market.
If you already own Nvidia, you could consider hedging any potential downside by purchasing protective put options. Alternatively, selling covered calls with strikes at your ideal ‘take profit’ level could give you some premium while waiting for Nvidia to reach your target price.
If you do not own Nvidia, you could consider selling put options with strikes at your ideal purchase price in exchange for some premium. If Nvidia falls below that strike price, you might have the opportunity to buy Nvidia at that strike price.
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