Nvidia's earnings were not exceptional. How to make money in options if gains slow down

CNBC

4 days ago

Nvidia's fiscal first-quarter results were strong, but tempered by challenges that kept them from being exceptional. The company reported record revenue of $44 billion, up 69% year over year and surpassing analyst estimates of $43.3 billion. Data center revenue, the core driver, reached $39.2 billion, close to estimates and up 73% year on year, driven by robust demand for AI chips. Nvidia's revenue guidance for Q2 fiscal 2026 was $45 billion, in line with analyst expectations, despite an $8 billion hit from China export restrictions. CEO Jensen Huang emphasized the "booming" demand for AI hardware, particularly for Blackwell GPUs, with shipments increasing to meet the needs of hyperscalers. Gaming revenue grew 42% to $3.8 billion, automotive and robotics surged 72% to $567 million, and professional visualization rose 19% to $509 million. Nvidia shares rose 5% on the report. Investors breathed a sigh of relief that the revenue projections didn't reflect an even larger China-related shortfall. That said, China's restrictions did have an impact. NVDA 5D mountain NVDA rises after earnings The company noted in its release that it was "unable to ship an additional $2.5 billion of H20 revenue in the first quarter" due to export licensing requirements. In the earnings call, it said that "losing access to the China AI accelerator market, which we believe will grow to nearly $50 billion, would have a material adverse impact on our business going forward and benefit our foreign competitors in China and worldwide." That statement highlights that, while restricting sales to China may slow them down temporarily, it will increase demand for chips from Nvidia's competitors and provide them with additional resources to dedicate towards research and development. Put differently, an unintended consequence of restricting access to technology to potentially unfriendly countries might not only hamper one of the U.S.' most successful companies. Time will tell, but Jensen also warned that the gap between US products and Chinese alternatives is decreasing. Options premiums will certainly fall somewhat - the "vol crush" - now that some light has been shed on the effects of the new administration's policies, but the cloud has not been lifted. Consequently, I expect a measured approach to one's Nvidia positions after a near 40% rally in the stock since mid-April makes sense. The trade One way to enhance one's returns if a stock remains only modestly bullish is to sell covered calls. Perhaps 20 delta or so with an expiration of 4-6 weeks. The July 3 weekly 155 calls were 20^ ("^" is option trader shorthand for "delta") as of Wednesday's close, with 35 days until expiration. However, a bit of choppiness is anticipated in the near term as investors digest the results more fully, and it may be necessary to adjust one's strikes to identify the 20 delta calls accordingly. DISCLOSURES: None. 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.