Constructing a Super AI Factory! NVIDIA's Deployment Strategy Before Earnings

On Monday, August 25, the three major U.S. stock indices fell, closing near their daily lows, and were similarly under pressure. $Dow Jones Industrial Average(.DJI.US)$ and $S&P 500 Index(.SPX.US)$ However, stocks that are set to announce earnings on August 27 increased against the market trend. $Nasdaq Composite Index(.IXIC.US)$ From a sector perspective, yesterday's stocks showed resilience compared to the broader market. $NVIDIA(NVDA.US)$ NVIDIA, buoyed by earnings expectations and recent company news, is believed to be one of the reasons supporting the stability of its stock price, which remains above its upward trend line. $PHLX Semiconductor Index(.SOX.US)$ Earnings Outlook

According to the earnings express on the Futubull app, the market expects the company's revenue for the second quarter this year to be approximately $46 billion, reflecting a year-on-year growth of about 53%; earnings per share are expected to be around $0.935, with a year-on-year increase of approximately 40%.

The above revenue and earnings expectations should account for the market's awareness of the H20 ban, especially since the implementation of the ban in April has resulted in around $2.5 billion worth of products being unable to be shipped normally, potentially facing impairment loss pressures.

Additionally, BLACKWELL currently has substantial shipment volumes and market demand, ensuring revenue and profit. The key factor is the gross margin; the company's guidance for the last quarter indicated a non-GAAP gross margin guidance of 72.0% ± 0.5% (i.e., 71.5% to 72.5%). Meanwhile, the GAAP gross margin guidance is 71.8% ± 0.5%. The performance of the gross margin will be a critical factor in assessing post-performance.

A research report from Morgan Stanley in mid-August clearly indicated that under comparable conditions, the data center efficiency using NVIDIA's GB200 NVL72 is the highest, which enhances the market's receptiveness to BLACKWELL. Most importantly, there is a positive effect on the upgraded version, Blackwell Ultra (scheduled for delivery in the second half of 2025), which has already entered mass production. Current partners include AWS, Google Cloud, Supermicro, and others, reflecting strong market demand (rumored to have sold out orders for 2025), ensuring revenue. As long as no negative news emerges from the production line, it will benefit the company's profit and revenue guidance performance.

Constructing AI Super Factories

In addition to last quarter's performance, the company's earnings guidance and outlook are also important. Following the formal announcement of Blackwell Ultra at the GTC conference on March 18, this performance is expected to focus on this upgraded version, positioned as a key computing platform for the era of AI super factories, concentrating on high-performance applications such as AI reasoning, agentic AI, and physical AI.

Moreover, this concept has also led to increased attention on the entire industry chain's performance in the U.S. stock market.

Network connection: $Coherent(COHR.US)$ $Lumentum(LITE.US)$ $Applied Optoelectronics(AAOI.US)$ $Fabrinet(FN.US)$ $Ciena(CIEN.US)$ $Credo Technology(CRDO.US)$ $Astera Labs(ALAB.US)$ $Corning(GLW.US)$ $Lumen Technologies(LUMN.US)$

Switch: $Arista Networks(ANET.US)$ $Cisco(CSCO.US)$ $Broadcom(AVGO.US)$ $Marvell Technology(MRVL.US)$ $Celestica(CLS.US)$

Energy Consumption Cooling: $Vertiv Holdings(VRT.US)$ $nVent Electric(NVT.US)$

Data center operators/solution providers: $Microsoft(MSFT.US)$ $Alphabet-C(GOOG.US)$ $Amazon(AMZN.US)$ $Meta Platforms(META.US)$ $Oracle(ORCL.US)$ $CoreWeave(CRWV.US)$ $Super Micro Computer(SMCI.US)$ $Dell Technologies(DELL.US)$

Returning to the main topic, the company recently launched the new Jetson AGX Thor chip, which is NVIDIA's latest generation of edge AI computing modules designed for robotic applications, based on the latest Blackwell architecture, offering 3.5 times the energy efficiency of the previous generation. The company’s AI superfactory plan is a strategic response to the growing demand for AI and geopolitical challenges; it has recently announced the launch of the B30/B30A chips aimed at maintaining competitiveness in the Chinese market, pending approval from U.S. policy.

In summary, whether in the short term or medium to long term, NVIDIA currently possesses numerous favorable conditions as an investment target.

Options Analysis

According to the latest interface of the Futubull desktop version, as of the close on August 26, the market expects the performance to fluctuate by ± 6.07%.

As of August 26, the open interest for call options with a strike price of 185 HKD, which expires on August 29, is at its highest level, totaling approximately 88,000 contracts. If exercised, this would involve an investment of 1.628 billion USD. However, compared to NVIDIA's market capitalization and average daily trading volume, this amount is insufficient to cause significant movement.

The options chain indicates that, as usual before earnings announcements, implied volatility has risen to higher levels, with the implied volatility of at-the-money call and put options around 80-90%. This is significantly higher than NVIDIA's historical volatility of 26% over the past 30 days. For options expiring by the end of the year, the average implied volatility is approximately 40%.

*The following options and ETF strategies are for educational purposes only and do not constitute any investment advice.

In a scenario of extremely high implied volatility, for short-term investors looking to buy aggressively, it is advisable to sell put options with sufficient margin to earn premiums (selling PUTs to acquire shares; in a high implied volatility environment, first earn the option premium, which can reduce the risk of acquiring shares).

For example, if you originally planned to buy 100 shares of NVIDIA at 175 HKD, you might consider selling a put option with a strike price of 175 HKD first to earn a premium of 3.8 HKD. In the worst-case scenario, if the price drops after earnings, you can stick to your original plan of buying 100 shares of NVIDIA at 175 HKD, reducing your effective cost to 171.2 HKD (175 - 3.8 = 171.2); if the stock price surges after earnings, you can deploy the premium earned accordingly.

In a situation of extremely high implied volatility (IV), another effective method for controlling risk is to use a Bull Call Spread. This involves buying a call option while simultaneously selling another call option, with the strike price of the bought option being lower than that of the sold option. This method primarily reduces the cost of purchasing the call option (from the premium earned on the sold option), at the expense of not being able to fully benefit from significant upward movements in the underlying stock price when it exceeds the strike price of the sold call option.

For investors holding stocks, a COVERCALL strategy can also be employed, whereby for every 100 shares held, one call option is considered for sale to earn option premiums. The strike price can reference the historical performance's predicted volatility, indicating a potential upward movement of approximately 6% or more in the stock price. Of course, this strategy anticipates that the stock price will remain within the 6% volatility range, while maintaining a medium to long-term bullish outlook on NVIDIA. (In the event that long-term investors are called away, the maximum they would earn is the option premium, after which they can seek to repurchase the shares.)

Aggressive deployment primarily using leveraged ETFs.

For more aggressive investors who also wish to avoid the risks associated with excessively high IV, a more direct approach is to choose leveraged ETFs, as they do not suffer from time decay and the potential risks associated with implied volatility.

NVIDIA 2x Long ETF: $CSOP NVIDIA Daily (2x) Leveraged Product(07788.HK)$ $GraniteShares 2x Long NVDA Daily ETF(NVDL.US)$ $T-Rex 2X Long Nvidia Daily Target ETF(NVDX.US)$

NVIDIA 2x Short ETF: $CSOP NVIDIA Daily (-2x) Inverse Product(07388.HK)$ $GraniteShares 2x Short NVDA Daily ETF(NVD.US)$ $Direxion Daily NVDA Bull 2X Shares(NVDU.US)$