Shares of Nvidia Corp. (NASDAQ: NVDA) dropped to a three-week low on Thursday, as concerns over the company’s growth outlook weighed on investor sentiment. The AI chip giant, which has been at the center of the AI spending boom, saw increased volatility following its latest earnings report, which, while strong, failed to meet overheated investor expectations.
Adding to the downward pressure, a major options trade suggested further declines could be on the horizon.
Massive Bearish Bet on Nvidia: What Happened?
Between 2 p.m. and 2:40 p.m. on Thursday, an unnamed trader bought over 300,000 put option contracts, betting that Nvidia’s stock would drop to $115 by March 7—a 12% decline from Wednesday’s closing price.
📉 Key Details of the Trade:
✔ Strike Price: $115
✔ Expiration Date: March 7
✔ Put Volume: More than two times its 20-day average
✔ Final 30 Minutes: Additional 100,000 contracts traded, possibly indicating profit-taking
This put contract became the most actively traded options contract in U.S. markets on Thursday, highlighting rising bearish sentiment around Nvidia.
Why Is Nvidia Facing Selling Pressure?
📌 1. “Good-But-Not-Great” Earnings Report
Despite strong quarterly earnings, Nvidia’s report did not deliver the kind of blowout results that investors had come to expect. With the stock up nearly 300% over the past year, expectations were exceptionally high, and any sign of slowing growth triggered selling.
📌 2. Macro Events on the Horizon
The State of the Union address and the Non-Farm Payrolls (NFP) report next week could increase market uncertainty, which options traders may be hedging against.
📌 3. Rising Implied Volatility
Chris Murphy, co-head of derivatives strategy at Susquehanna International Group, noted that implied volatility on the option rose by 8 points, suggesting increased investor caution.
Market Reaction: Nvidia’s Stock Under Pressure
📉 Thursday’s Stock Performance:
✔ Nvidia stock fell 3% following the initiation of the put trade.
✔ The bearish bet may have exacerbated the selling pressure, as traders anticipated further weakness.
✔ The stock is now approaching technical support levels, which could determine the next move.
Is Nvidia Overvalued? The Debate Continues
✔ Bull Case: Nvidia remains the undisputed leader in AI chips, and long-term demand for AI infrastructure continues to rise.
✔ Bear Case: After a historic rally, Nvidia’s valuation remains stretched, making it vulnerable to profit-taking and short-term corrections.
What’s Next for Nvidia?
🔹 Technical Support Levels: If Nvidia breaks below key support levels, further downside could be triggered.
🔹 Upcoming Catalysts: Investors will closely watch macroeconomic data, AI sector trends, and institutional positioning.
🔹 Options Market Sentiment: Elevated put activity could signal further downside risk, but if the stock holds steady, some bearish traders may start unwinding their positions.
📢 Final Takeaway:
While Nvidia remains a dominant force in AI, the recent bearish options activity suggests near-term caution. Investors will need to closely monitor market trends, macroeconomic factors, and Nvidia’s stock momentum to determine whether this is a short-term dip or the beginning of a deeper pullback. 🚀📉
