There’s a simple reason the Nasdaq-100 Index closed at new records Friday: the world’s biggest company notched its first record since May.
Nvidia, which accounts for 13% of the Nasdaq and 8% of the S&P 500 Index, added 1.3% Friday, ending seven weeks of sideways trading surrounding a high-stakes meeting between the President and corporate executives leading “Super Intelligence.”
The rally puts the value of Jensen Huang’s semiconductor business at just under $5.7 trillion, and based on the price of options trading at Nvidia, it will likely cross the $6 trillion threshold by the end of this month.
It should be a comforting notion for equity bulls.
Currently, there is about a 50% chance Nvidia will reach a $6 trillion valuation between now and the end of this month, and a 13% chance it happens this week, according to market-maker pricing of deltas on Nvidia options expiring this week and Oct. 30, which measure the sensitivity of options pricing relative to moves in the stock. The odds it happens between now and December 18 is about 67%.
They’re also implying about a one-in-sixteenth chance Nvidia could hit $7 trillion by Nov. 20. Based on the current share count, Nvidia would need to touch $248 to cross the milestone.
Nvidia, YTD
“Nvidia’s buyback announcement was a bright spot,” Ben Emons, managing director at Highline Asset Management, wrote in a note to clients last week. “The buyback is not just a payout but a capital-allocation event that asserts confidence in long-run AI demand.”
It’s important to note when using deltas to gauge a range of possibilities that the same size move in the opposite direction is also just as likely. While that’s largely the case for Nvidia, some many of the stock’s call options are currently trading with a higher implied volatility than the equivalent puts, Barchart data show. Such “call skew” is a sign that traders have a bias is towards hedging for a rally.
