Nvidia Bulls Pile Onto Options, Unfazed by Slowing Revenue Growth
There's no shortage of $NVIDIA(NVDA)$
Shares slipped 0.9% to $180.03 at 1:47 p.m. in New York Thursday after the company reported data center revenue of $41.1 billion in its fiscal second quarter ended July 27. While that's up 51% from a year earlier, it's slightly below the $41.29 billion average analyst estimate.
Total revenue growth slowed to 56% to $46.74 billion. That’s the smallest gain in percentage terms since the three months ended April 2023, when sales slipped 13.2%. Although growth has slowed from a peak of 265% in January 2024, the latest figure is still more than double the $22.1 billion recorded when Nvidia was growing at that blistering speed.
"Shares sold off modestly after hours, likely because near-term revenue didn’t beat FactSet Consensus estimates by as much as in recent quarters, but we view this as a buying opportunity,” Morningstar analyst Brian Colello wrote in a note to clients Thursday morning, before the market opened.
Seven of the 10 biggest block trades in Nvidia options were bullish. The largest block trade posted so far Thursday involved an active seller getting a $10.3 million premium for selling put options that give their holders the right to sell 530,000 Nvidia shares at $180 each in 204 days.
That transaction could be profitable for the seller should the stock bounce back above that level before the contract expires, allowing the put option to expire worthless. The price of that contract has already fallen to $19.05, from $19.36 that the seller collected at the time of the transaction as the stock trimmed its losses. That decline makes it cheaper for the seller to buy back the contract and book the profit, should he or she opt to close it before expiration.
The bulls have the analysts' backing. More than 92% of the analysts who cover Nvidia have the equivalent of a buy rating on Nvidia. On average, they expect the share price to rise to $213.63, implying further upside potential for a stock that has already climbed almost 34% this year.
Capital trend data are also sending positive vibes. Inflows into the stock outpaced outflows by $203.32 million even as the stock ticked lower. Money is pouring into the stock even amid continuing uncertainty over the company's shipments to China, a market that CEO Jensen Huang estimates could bring $50 billion of opportunity to the company this year.
Nvidia hasn't shipped any of its AI chips to China even after President Donald Trump said he would allow them, in exchange for a 15% share of the U.S. government on those sales. Despite that, the U.S. government still "has not published a regulation codifying such requirement," Chief Financial Officer Colette Kress said during the company's earnings call Wednesday night.
The CEO said the company could see $2 billion to $5 billion in revenue from H20 chips to China in the third quarter should the geopolitical issues that have gotten in the way of shipments ease. Still, the uncertainty remains and the company opted not to include that in its revenue outlook for the three months ending in October of about $54 billion, plus or minus 2%.
"We're talking to the administration about the importance of American companies to be able to address the Chinese market," Huang said. "I think the opportunity for us to bring Blackwell to the China market is a real possibility. And so we just have to keep advocating the sensibility of and the importance of American tech companies to be able to lead and win the AI race and help make the American tech stack the global standard."
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