NVIDIA's Wednesday earnings report night: The battle that will determine the fate of the AI bull market has arrived!

NVIDIA will release its quarterly earnings after the market close on May 20th (Wednesday) Eastern Time, marking a critical stress test in the current AI bull market cycle. The semiconductor sector’s technical indicators are severely overbought, options positions are heavily skewed toward bullishness, and the rare signal of “stock price and implied volatility rising together” significantly amplifies the two-way risks of this earnings window compared to previous instances.

Goldman Sachs TMT chief analyst Peter Callahan published a briefing titled “Yellow Light” on Monday, noting that the Nasdaq 100 Index (NDX) and the Philadelphia Semiconductor Index (SOX) recorded their first decline week of the quarter last week; the 10-year US Treasury yield rose to about 4.60%, the largest weekly increase in over a year; oil prices rebounded to approximately $109 per barrel; and the VIX moved higher in tandem. He pointed out that the core contradiction facing AI and semiconductor themes is: fundamentals remain strong, but technical pressures continue to build.

Options analysis firm SpotGamma recently reported that the market is showing a rare “rising stock prices and rising volatility” parallel pattern—normally, these two should have an inverse relationship. This signal indicates traders are chasing gains while also paying premiums for protection against large swings. The implied volatility of NVIDIA’s earnings is now at 6%, with market focus intensely centered on this timing.

The earnings results and forward guidance will directly test the market’s confidence in the supercycle of AI computing power. Given NVIDIA’s high correlation with the semiconductor and broader tech sectors, its earnings performance—whether positive or negative—will trigger widespread market reactions.

Technical signals since 1999/2000 warn of extreme risk

The magnitude and speed of this semiconductor rally have pushed technical indicators to historically overbought levels.

Goldman Sachs data shows that the SOX index has risen about 70% since its late March lows, adding over $5 trillion in market value along the way. Drivers include a phased easing of geopolitical tensions, better-than-expected corporate earnings—such as AMAT raising its full-year guidance beyond expectations, and Cisco reporting a 35% YoY increase in product orders—and growing investor confidence in AI computing demand. Semiconductor industry earnings expectations have been raised by over 25% since the start of the year.

However, Peter Callahan specifically highlighted that the SOX index is currently about 60% above its 200-day moving average, a deviation not seen since the peak of the 1999/2000 internet bubble. He also noted that Goldman Sachs’ high-momentum factor portfolio has experienced 12 days this year with single-day moves exceeding ±5%, accounting for nearly 15% of trading days; the rapid expansion of leveraged ETFs and options products further amplifies this two-way elasticity.

“Before the end of this week’s earnings season (NVIDIA on May 20) and the start of summer trading, it’s worth keeping these tactical dynamics in mind,” Callahan wrote. Goldman Sachs’ overall trading desk remains moderately constructive on AI and semiconductor themes, but tactically advises investors to remain cautious about technical challenges.

NVIDIA earnings: forward guidance may be more critical than quarterly results

Market sentiment remains optimistic about NVIDIA’s fundamentals, but recent stock price movements have already somewhat priced in expectations.

According to Goldman Sachs’ preview report, analysts generally expect NVIDIA’s revenue this quarter to beat market forecasts by about $2 billion—where the company’s historical beat margins are typically 2-3%. Market’s focus is more on the forward guidance for the next quarter, with consensus currently around $86 billion, up about 9% quarter-over-quarter. Other key points include whether NVIDIA’s approximately $1 trillion data center revenue guidance has further upside potential, and the narrative around accelerating demand for Agentic AI inference—especially for its planned shipping of pure CPU rack products starting in late 2026.

Looking at recent price trends, NVIDIA has risen for seven consecutive trading days, with a 20% increase in that period—the longest such streak in nearly two years; since the late March lows, the company has added about $1.7 trillion in market value. However, Goldman Sachs data also shows that in the five trading days following each of the last four earnings reports (T+1), the stock declined three times. Since May 2022, large single-day gains triggered by earnings have actually never occurred.

Options market: extreme bullish bets and tail hedges aligned

Options positioning reveals a set of conflicting signals.

According to SpotGamma data, the overall positioning remains extremely bullish, with traders continuously rolling NVIDIA call options to higher strike prices, with call skew (call options implied volatility premium) remaining at the high end of the 90-day historical range, while downside protection demand is very limited. Data from 22V Research shows that last Friday, the nominal volume of S&P 500 call options hit a record $2.6 trillion, with calls accounting for 60% of total options volume; the Philadelphia Semiconductor Index RSI also reached levels not seen since March 2000.

Meanwhile, hedging against downside risks is quietly expanding. SpotGamma notes that large put option structures and buying activity around the S&P 500 (SPY), semiconductor ETFs (SMH), and DRAM-related assets have increased significantly, mainly concentrated in deep out-of-the-money strike prices, indicating these are more for tail risk hedging rather than directional bets. “Market participants are not bearish on NVIDIA, but preparations for downside scenarios are not trivial,” SpotGamma wrote, “any directional shift could quickly ripple through broader markets.”

SpotGamma added that since the March lows, NVIDIA has gained over 35%, and the scale of current bullish options positions means that if earnings disappoint or trigger large profit-taking, a significant directional reversal could occur.

Market breadth risks: rally supported by few stocks

Amid the strong performance of semiconductors and large tech stocks, the overall participation in the US stock market is lacking, creating structural concerns.

Peter Callahan pointed out that although the S&P 500 has risen about 8% year-to-date, only about 52% of its components are in positive territory. Notably underperforming sectors include residential real estate, medical devices, engineering construction with no government exposure, federal IT services, software and services, independent power producers, restaurant chains, commercial real estate brokers, and insurance brokers.

He admitted that when examining these sectors’ charts, he questions whether the current market performance truly reflects “health,” or if it’s merely a “funding source” effect—investors being forced to concentrate capital in a few large-cap AI stocks. Oppenheimer’s derivatives team also noted that only about one-fifth of S&P 500 components have outperformed the index over the past month, with the dispersion index reaching its highest in over a year, and implied correlations near their lows for the year-to-date. Goldman Sachs’ prime brokerage data also shows recent signs of “risk withdrawal” from the tech sector.

Risk warnings and disclaimer

Market risks are present; investment should be cautious. This article does not constitute personal investment advice and does not consider individual user’s specific investment goals, financial situation, or needs. Users should consider whether any opinions, views, or conclusions herein are suitable for their particular circumstances. Invest accordingly at their own risk.