Since early last year Nvidia (NVDA) has become the Super Bowl of earnings and like the actual big game, it comes right at the end of the season. Here we are at the end of third-quarter earnings reporting season and markets are again on pins and needles waiting for Nvidia’s earnings Wednesday after the market close to see if this boom in artificial intelligence and data center buildouts continues. We’ll talk about what we’re expecting after the report, and how we plan to hedge in the event that earnings fail to impress, much like we saw in the prior Q2 report. Fundamental outlook The analyst community is looking for Nvidia to report 75 cents in EPS on $33.13 billion in revenue, according to FactSet. The focus will be on the new Blackwell GPU that has been covered heavily with reports of it being sold out for the next 12 months, creating concerns of supply not meeting demand, as well as recent reports of the unit overheating. The concerns with Blackwell actually began in the prior quarter’s earning report that saw EPS beat consensus by just 5%, but still come in at amazing levels. Nvidia charts The prior quarter’s growth rates are coming down from astronomical levels of multiple hundreds of percentage points. As a result Nvidia sold off on Aug 28 from around the $130 level all the way down to $101.50. Since then the stock rallied back to and through $130 approaching $150. The stock has recently drifted lower ahead of Wednesday’s report to the mid-$140’s. I’m wondering if the earnings report does not knock the “Sox” (short for the Philadelphia Semiconductor Index) off investors, are we headed back down to the $130 key technical pivot level? The 50-day moving average is currently at $132.37. In the most recent rebalance at Inside Edge Capital Management, LLC we increased our holding in NVDA from 8% to 10% in our firm’s signature growth portfolio. In our dividend model we increased from 2.5% to 3.5% . Keep in mind that NVDA pays a small dividend and is over 7% of the S & P 500. However, in our more nimble speed boat of a portfolio “Active Opps” we are looking to hedge a possible move back to the $130 level against our holdings in the two slower moving portfolios. Hedge on Nvidia, just in case We’re looking at buying a Nov 22nd expiration $140 / $130 put debit spread, currently trading at $2.88. This means we’re looking to buy the $140 strike puts, sell the $130 strike puts, for a cost of $288 per spread giving us a maximum potential profit of $712.00 ($10 spread minus premium paid $2.88 = $7.12). You would decide how many spreads to trade based on the size of your Nvidia holdings. If you hold 500 shares of NVDA and want to hedge the whole position down to $130.00, you would buy 5 spreads for a total cost of $1440.00 giving you a max possible profit of $3560. However, I still very much believe the AI boom is in the early stages and this insurance policy I’m discussing will go unclaimed and premiums will be written off as capital losses. If NVDA is able to break through 100% Fib projection at $145.93, the Elliott Wave model shows the next upside target of $185.54. That target will be met as Nvidia is delivering on the Blackwell demand and revenues are moving through the $40 billion and $50 billion levels per quarter, which I’m thinking will be sometime next year. -Todd Gordon, Founder of Inside Edge Capital , LLC DISCLOSURES: (Gordon owns NVDA personally and in his wealth management company Inside Edge Capital. Charts shown are Deepvue.) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
