The 2024 Summer Sell-Off Is Over

Nvidia (NVDA) is up 5.68% this morning, at $114.70. Apple (AAPL) is up 3.64% at $221.15. And just like that my September Nvidia options are looking good. I have a September 19 | $110/$115 | Qty: 2 | Short Put Spread I sold earlier. And my riskiest exposure is a September 19 | $125/$130 | Qty: 1 | Short Put Spread I rolled out earlier this month.

Nvidia faces some challenges ahead: 1) the 3 month delayed release of the new Blackwell B200 chip (due to a design flaw); 2) the forthcoming release of the new Huawei Ascend 910c AI Chip; and 3) the looming August 28th earnings report, when FactSet analysts expect the company to report adjusted earnings of 64¢ a share on revenue of $28.6 billion. Let me break down my analysis on each of these challenges:

1. The delayed release is a) not uncommon; b) does not change any of the chips expected functional benefits; and c) has already been priced into the stock over the past month.
2. Competition from China and other places is highly expected. One of Nvidia's key strengths is the significant barriers to competition the company has built up. A more significant threat in my opinion are the looming antitrust investigations which could weaken some of the competitive barriers currently in place.
3. I’m bullish on Nvidia for the immediate future (1 year out). All the while the big sell-off was happening the company has been moving forward on its plans. And no significant challenges or threats have emerged. So, I believe Nvidia will beat expectations when it reports on August 28th. That’s why I have a bunch of September options in play to allow time for the stock price to respond to what I believe will be a positive earnings report.

BTW: I do not like the way fear is stoked in the headlines whenever there is a “Sell-Off.” I find headlines using terms like “falling,” or “crashing” are misleading. Yes the market is in fact “falling,” or “crashing,” but I believe the point of any news is to inform investors and help position them to trade effectively. To that end I prefer to call a downturn a “Sell-Off.” I think Sell-Off is a more accurate description of events. The price of a stock falls sharply because a bunch of folks who hold the stock are selling. And the main reason they sell is to take profits. So I look at the periods as times when a stock has hit such a high that a bunch of folks decide to cash-in and play another day. I see these times as important opportunities to review my positions and decide if I want to cash-out as well, or hold and wait for more long-term gains.

That’s my take on things for now. Your comments are welcome. Happy trading!