Monday Takeaways: It’s All About Nvidia

Shah Gilani|February 24, 2025

AI may be the greatest technological development since the internet…

But things might have gotten a bit ahead of themselves.

Nvidia is set to report earnings after the bell on Wednesday. The options market currently has a +/- 20% post-earnings move priced in.

With a $3.2 trillion market cap, even a small move on Nvidia could send markets higher or into a tailspin.

Fortunately, I’ve got a plan to manage this week’s chaos.

Because while Nvidia’s earnings are big news, it’s not the only key event we need to watch.

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TRANSCRIPT

Hey, everybody.

Shah Gilani here with your Monday takeaways.

First off, what are we going to gather from last week?

Friday was a decidedly bad day for the markets. It was the worst one day reaction to news this year.

So as far as getting hit, Friday was pretty ugly.

The S&P 500 was down 1.71%.

The Nasdaq Composite was down 2.2%.

The Nasdaq 100, looking at the triple Qs (QQQ), was down 2.8%.

So, markets didn’t like the fact that we had a soft flash PMI number…didn’t like the fact that consumer expectations and sentiment for future inflation are very high.

In other words, consumers are thinking prices are going to continue to increase over time, over the next five, 10 years.

They don’t see an abatement in inflation, which puts upward pressure on inflation. So that’s a problem right there.

Markets didn’t like any of that.

Now the sell-off wasn’t horrible in terms of what it could have been.

Already, here we are Monday morning, pre-open futures are up, about 0.5%. So they’re trying to come back maybe a little bit of a bounce hoped for.

But the takeaway from last week was nervousness. That’s the takeaway from what happened last week.

There’s nervousness out there. Why?

Well, inflation is certainly not anywhere that the Fed would like it, in other words, in a box somewhere that they could control it.

Consumers are starting to get a little nervous. Sentiment is starting to teeter, and that’s worrisome because we’ve had just a robust economic background for markets.

Is that fading?

Are consumers going to finally buckle up and say, well, we’ve had enough…we’re loaded up enough? Our debts are high enough, and maybe we’re going to cool out?

Don’t know.

That’s what we’re worried about. That’s what markets are worried about.

So, again, we were up this morning, pre-open, and it’s going to be an interesting week.

A lot of stuff is going to be happening this week.

The biggest thing I think really isn’t going to be PCE on Friday, though we want to see what PCE is going to be. If it shocks in a very negative way, then the markets could sell off pretty hard on Friday because after all, sometimes Friday’s markets are prone to big whipsaws.

I think the bigger news really is NVIDIA earnings on Wednesday after the close.

It used to be when I was on the floor in Chicago in the early 80s, the saying was as GM goes, so goes the market.

Well, now it’s, I think, as NVIDIA goes, so goes the market.

So let’s have a quick look at NVIDIA, what it looks like chart wise, and, determine if there’s something to do there.

And I actually think there is something to do because as far as NVIDIA goes, there’s a play.

I mean, it’s expensive.

The options are expensive.

And the volatility is pretty high.

So it’s entirely possible that NVIDIA could rise 20% or fall 20% depending on the earnings report and the forward guidance.

But first of all, here’s just a look at the S&P 500.

You know, nothing worries me here.

Yes. Here’s Friday’s ugly little dip on Friday. But we’ve got support all the way down here.

If we get all the way down here all of a sudden, that’s something to worry about.

If we can break $6,000, we can easily get down and start looking at $,5700.

And then if we’re going to break that, right down here, this level here is at $5,629.5. So we break fifty seven hundred, something’s wrong.

So, I don’t care that the market has been a little bit soft. It can’t go up in a straight line. This is a very bullish pattern.

Now as far as NVIDIA goes, here’s the deal with NVIDIA folks.

It’s volatile. It’s a volatile stock. It’s always volatile around earnings. But the way options are priced on NVIDIA right now, it could be a 20% upside move if the earnings are really good, and it could be as much as, yes, an almost 20% downside move if the earnings are very disappointing and guidance is disappointing.

Investors are going to be keyed into that because we see the other day that Microsoft is basically pulling back a little bit on their spending on data centers.

That got the market a little worried. This morning, there’s a lot of talk of what is on Microsoft’s mind. They came out not too long ago and said they’re going to spend all this money.

Now, they’re like, well, maybe we need or we don’t have to spend that much.

It’s not so sure. So look at NVIDIA. That’s going to be the question: What is the forward guidance going to be?

What are the what’s management going to say about what their order’s looking like?

NVIDIA, over the last 12 months, people, revenue over the last 12 months for NVIDIA – $113.6 billion.

Operating profit over the last 12 months, $71 billion.

Net income, $63 billion.

So, company’s been hitting it out of the park. If they continue to do so, then guide higher, we can see this thing break out to new highs.

But a disappointing report, disappointing guidance, you’re going to get a chance to buy it lower.

How do you play that?

Maybe you want to buy a straddle.

Maybe you want to buy some very out of the money calls. They’re not cheap folks.

And maybe you want to buy some out of the money puts.

Maybe you want to buy both out of the money calls and out of the money puts as an interesting move to play some crazy volatility. That’s going to get expensive.

I guess the bottom line here, the takeaway is be smart with NVIDIA.

Don’t swing for the fences on one trade unless you can afford to put some risk capital down.

If you own it, I wouldn’t sell it. No. If I own this at a lower price, I don’t I wouldn’t sell it.

On a crash, yes. I’d buy more for sure.

But, there’s going to be a make or break perhaps for the market if NVIDIA is either up big or down big.

If it’s up big, then the S&P 500…everything’s going to gather itself and likely move higher.

If it’s down big, the nervousness we saw on Friday will immediately come back, and then everyone’s going to hang their hats on PCE on Friday.

So those are your takeaways. Be careful out there. It’s going to be a fun week.

There’s a little nervousness. That’s the thing you’ve got to keep in mind.

That’s my takeaway, really.

When markets are a little nervous, maybe be a little more risk averse. Just be a little more conservative because that’s what’s called for.

I’ll catch you guys next week.

Cheers.