Nvidia's wild ride: earnings beat, stock plunge, and a $115 price target

2025-02-28 nvidia

New York, Friday, 28 February 2025.
Nvidia’s stock price defied logic, plummeting 8.5% despite exceeding earnings expectations. President Trump’s tariff announcements triggered a broad market downturn that overshadowed Nvidia’s stellar performance. One options trader is betting big on further declines. They purchased over 300,000 contracts, anticipating the stock will hit $115 by March 7. This bold move, revealed by Bloomberg, suggests a potential 12% drop and fueled speculation about Nvidia’s near-term prospects.

Broader market woes overshadow nvidia’s success

The Nasdaq Composite plunged 2.8%, the S&P 500 shed 1.6%, and the Dow Jones Industrial Average fell 0.5% [1]. These declines reflected investor anxiety over President Trump’s newly announced tariffs on Mexico, Canada, and China [1][3][9]. These tariffs, set to begin March 4, 2025, sparked fears of rising inflation and economic instability [1][3]. This macroeconomic environment contributed significantly to the sell-off in technology stocks, regardless of individual company performance [3]. Even positive earnings reports failed to reassure investors amidst the broader market uncertainty [1].

Option trader’s bearish bet

The purchase of 300,000 put options indicates a strong conviction that Nvidia’s stock price will decline further [2][4]. Chris Murphy, the derivatives strategy co-head at Susquehanna International Group, suggested this large put purchase exacerbated Nvidia’s stock decline on Thursday [2]. Following the options purchase, Nvidia’s stock price dropped approximately 3%, with the option’s implied volatility increasing by eight points [2]. The surge in put option activity saw Nvidia’s put option volume exceed twice the average level of the past 20 days [2][4].

Analysts remain optimistic despite market reaction

Despite the negative market reaction, some analysts remain bullish on Nvidia’s long-term prospects [1][6]. Bank of America analysts consider Nvidia a ‘top pick on AI dominance’ [1]. They also raised their price target for Nvidia to $200 from $190 [1]. Wedbush analysts stated there are ‘few (if any) blemishes’ and see ‘seemingly only good news ahead’ [1]. These positive sentiments contrast with the immediate market concerns, highlighting a divergence between short-term market sentiment and long-term growth potential [1].

Nvidia’s financial performance and future catalysts

Nvidia’s recent earnings report showcased strong performance, with revenue increasing 78% year-over-year [6]. The company’s Blackwell AI chip series is expected to generate $11 billion in sales this quarter [6]. This alleviates concerns regarding potential revenue declines during the transition to the Blackwell series [6]. The upcoming GPU Technology Conference (GTC) in March is anticipated to be a positive catalyst, with potential new product announcements related to the Blackwell family [1][6]. Thirty-three out of 36 analysts recommend purchasing Nvidia stock, with an average 12-month price target of $177 [6].

Tariffs impact and market sentiment

President Trump’s announcement of tariffs on Mexico and Canada, effective March 4, 2025, intensified market anxieties [1][3][9]. These tariffs include a 25% tax on products from Canada and Mexico, and a 10% tariff on Canadian oil [1]. Additionally, there will be a 10% tariff increase on products from China [1][3]. Concerns about these tariffs potentially fueling inflation and harming consumer spending contributed to the overall negative market sentiment [3][9]. The technology sector, in particular, experienced significant selling pressure [1][3].

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