Macro: Sandcastle economics
Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.
Market Specialist
Summary: Nvidia (NVDA) has bounced back from its recent lows of below $100 and gaining over 18% last week due to the overall market strength in semiconductor stocks following softer-than-expected Producer Price Index (PPI) figures and increasing rate cut expectations. Investors are also loading up the shares ahead of Nvidia’s earnings report on 28th August, hoping the company will keep up with its record of exceeding expectations. Nvidia shares closed at $127.25 on Tuesday after falling 2.1%.
What is happening with Nvidia?
Nvidia's stock price recently fell below 100, driven by a broader sell-off in the tech sector and a 3-month delay in the release of its next-generation Blackwell B200 chip. This setback has raised concerns among investors, contributing to the stock's decline. However, it has since rebounded from the lows as investors saw the dip as an opportunity to accumulate shares ahead of its earnings report.
The chip maker is also set to face tougher competition from its peer, Advanced Micro Devices (AMD). AMD is acquiring ZT systems, a designer of data-center equipment for nearly $5 billion to compete with Nvidia as the next generation of data centres housing more powerful AI chips. Nvidia CEO Jensen Huang has addressed concerns about the competition by emphasizing the company's advantage in total cost of ownership, which includes indirect factors such as power and cooling demands.
Nvidia remains the most critical player in the AI space with its competitive edge and ability to stay ahead of the curve. Goldman Sachs reaffirmed its bullish stance on Nvidia ahead of the earnings release, citing strong demand for artificial intelligence from cloud service providers and enterprises.
What can you do?
Investors looking to increase their stake in Nvidia and wish to earn some income but feel that there could still be some downside in the short term may consider selling cash-secured put options on Nvidia. This strategy allows investors to potentially acquire Nvidia shares at a lower price while earning a premium. Investors must set aside the cash required to purchase the stock if the option is exercised.
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Advantages of Cash-Secured Puts
Risks of trading Cash-Secured Puts
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