Nvidia Earnings Night on Wednesday: The Battle That Will Decide the Fate of the AI Bull Market Is Here!

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Nvidia will release its quarterly report after market close on Wednesday, May 20 (U.S. Eastern Time), marking a key stress test for the current AI bull market cycle. The semiconductor sector is technically severely overbought, options positioning is highly skewed towards bullish bets, and the rare “stock price and implied volatility rising together” signal has significantly amplified the two-way risks in this earnings window compared to the past.

Peter Callahan, chief TMT expert at Goldman Sachs, released a briefing titled “Yellow Light” on Monday, noting that the Nasdaq 100 Index (NDX) and Philadelphia Semiconductor Index (SOX) recorded their first weekly decline of the quarter last week; the 10-year U.S. Treasury yield rose to around 4.60%, the largest weekly increase in over a year; oil prices rebounded to around $109 per barrel; and the VIX rose simultaneously. He pointed out that the core contradiction currently faced by the AI and semiconductor theme is: fundamentals remain strong while technical pressures continue to accumulate.

Options analytics firm SpotGamma noted in a recent report that the market is exhibiting the rare phenomenon of “stock price rising and volatility climbing together”—where typically, the two have an inverse relationship. This signal suggests traders are paying a protection premium for large moves even as they chase the upside. The implied volatility for Nvidia’s earnings window is already at 6%, with market attention highly focused on this event time.

Earnings results and forward guidance will directly test whether the market’s anticipation of an AI computing supercycle holds true. Given Nvidia’s high correlation with the semiconductor sector and the broader tech market, its earnings performance—good or bad—will trigger a wide range of market reactions.

Technical: Most Extreme Warning Since 1999/2000

The magnitude and speed of the current semiconductor rally has pushed technical levels to historically overbought territory.

Goldman Sachs data shows the SOX Index has risen about 70% from its low at the end of March, adding over $5 trillion in market value. Contributing factors include easing geopolitical tensions, earnings beats—including AMAT’s guidance raise far above expectations, CSCO’s product orders up 35% YoY—and renewed investor confidence in AI demand; sector earnings expectations have been raised by over 25% year-to-date.

However, Peter Callahan especially notes that the SOX Index is currently about 60% above its 200-day moving average, an unprecedented divergence since the 1999/2000 internet bubble peak. He also points out that Goldman’s high-momentum factor basket has already had 12 single-day swings of over ±5% this year—nearly 15% of all trading days; the rapid growth of leveraged ETFs and options further amplifies this two-way volatility.

“Before this week’s earnings season (Nvidia, May 20) ends and summer trading begins, it’s worth keeping these tactical dynamics in mind,” Callahan writes. Goldman’s trading desk remains constructive on AI and semiconductors mid-term, but tactically advises investors to remain cautious about technical challenges.

Nvidia Earnings: Forward Guidance May Matter More Than Current Results

Market sentiment remains optimistic about Nvidia’s fundamentals, but recent price action has likely priced in some expectations.

According to Goldman Sachs’ Nvidia earnings preview, analysts generally expect the company’s revenue to exceed the market forecast by about $2 billion this quarter—whereas historically, beats range from 2% to 3%. Of greater focus is guidance for next quarter, with consensus at around $86 billion, up about 9% quarter-over-quarter. Other focal points include: whether Nvidia’s cumulative data center revenue guidance, around $1 trillion, could see further upside, and narratives around accelerating Agentic AI inference demand—especially its pure CPU rack product expected to ship in H2 2026.

Looking at recent price action, Nvidia has logged 7 consecutive days of gains, rising 20% over the stretch, the longest winning streak in nearly two years; market cap has increased by about $1.7 trillion since the late-March low. However, Goldman data also shows that on the trading day after its past five earnings releases (T+1), Nvidia’s shares dropped four times; since May 2022, a sharply higher post-earnings single day move has actually not occurred.

Options Market: Extreme Bullish Bets and Tail Hedging in Place

The options positioning structure reflects conflicting signals.

According to SpotGamma data, overall positions are still extremely bullish, with traders rolling call positions up to higher strikes, call skew remains at the upper end of the 90-day historical range, while demand for downside protection is very limited. Data cited by 22V Research shows nominal S&P 500 call option turnover hit a record $2.6 trillion last Friday, with calls accounting for 60% of all options traded; Philly SOX RSI has also reached the highest level since March 2000.

At the same time, hedges against downside risk are quietly being built. SpotGamma notes that large put option structures and buying are rising for the S&P 500 (SPY), semiconductor ETF (SMH), and DRAM-related assets, concentrated in deep out-of-the-money strikes, indicating they function more as tail risk hedges than pure directional bets. “Market participants are not bearish on Nvidia, but preparations for downside scenarios are considerable,” SpotGamma reported, “Any directional reversal would almost instantly ripple broadly through the market.”

SpotGamma adds that Nvidia has climbed more than 35% from its March low, and given the size of current bullish option positioning, a disappointing earnings report or broad profit-taking could trigger a notable reversal.

Market Breadth Risk: Rally Supported By Only a Few Stocks

Beneath semiconductors’ and tech giants’ strong showing, the broader U.S. market’s lack of participation is developing into a structural concern.

Callahan notes that while the S&P 500 is up about 8% YTD, only roughly 52% of its components are in positive territory. Sectors lagging clearly this year include housing, medical devices, engineering & construction without government exposure, federal IT services, software & services, independent power producers, restaurant chains, commercial real estate and insurance brokerages, among others.

Callahan admits that when looking at these sector charts, it makes him question whether current market action truly reflects overall “health,” or if it’s merely the “source of funds” effect of investors being forced to concentrate flows in a few large-cap AI stocks. The Oppenheimer equity derivatives team also notes that only about one-fifth of S&P 500 constituents outperformed the index in the past month, the dispersion index has climbed to a more than one-year high, and implied correlation is near YTD lows. Goldman’s prime brokerage also shows the tech sector recently has seen apparent “risk-off” moves.

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