November 22, 2024

Stock ETFs Go on Rollercoaster Ride With Nvidia

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Stock volatility

Shares of Nvidia went on a rollercoaster ride after the company reported earnings results for the third quarter.

The AI chip giant fell as low as $140 in pre-market trading, surged to nearly $153 at the open, and then fell back down to $140 before rebounding again.

Shares were trading at $145 early Thursday, then saw a slight increase to around $147 at close.

The SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust (QQQ), both of which count Nvidia as their largest holding, followed in Nvidia’s footsteps, seesawing between gains and losses.

Despite trading in a wide range on Thursday, Nvidia’s volatility was less dramatic than some investors had anticipated.

Ahead of the results, options markets were implying that the stock would move 8% in either direction, but the stock only gained 4.8% at the high and lost 3.6% at the low.

Some investors were surprised that the stock didn’t react that strongly to the company’s relatively modest guidance.

While Nvidia handily beat on the top and bottom lines in Q3, the company forecast revenues of around $37.5 billion for Q4, equal to what Wall Street analysts were expecting but below some of the more bullish expectations of investors.

Equally bullish commentary from Nvidia CEO Jensen Huang about the sustainability of demand for Nvidia’s AI chips seemed to quell any discontent from investors, who had gotten used to the company blowing out analyst estimates over the past couple of years.

Huang said that demand would exceed the company’s supply of its next generation Blackwell chips for much of 2025.

There has been a heated debate among Nvidia bulls and bears regarding the sustainability of the demand for the company’s AI chips, with bulls having the upper hand most of the time.

A few weeks ago, Nvidia’s largest customers, including Microsoft, Amazon, Meta, and Alphabet, all reiterated their intention to continue spending aggressively on AI infrastructure, including Nvidia chips.

Until that changes, Nvidia remains in the driver seat—to the benefit of the many ETFs that hold large positions in the stock.

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