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Options Sir Breaks Down the Hot Topic | NVIDIA Rises for Five Straight Days, Hitting a Two-Month High—Will the AI Leader Keep Dominating? Key Factors to Watch Going Forward

Amid yesterday's $Nasdaq Composite Index (.IXIC.US)$ pullback, $Advanced Micro Devices (AMD.US)$ post-earnings slump, and pressure on some large-cap tech stocks, NVIDIA showed clear outperformance.

On August 5, $NVIDIA (NVDA.US)$ NVIDIA’s stock rose approximately 3.4%, reaching an intraday high of $222.18,marking its fifth consecutive trading day of gains, with a cumulative increase of 15.4% over the five days—the highest intraday level since June 3.Based on its latest closing price of $219.22, NVIDIA’s market capitalization stands at approximately $5.35 trillion, surpassing Apple to reclaim the title of the world’s most valuable company.

1. SpaceX Provides Direct Catalyst, Reinforcing NVIDIA’s Competitive Edge

The most direct catalyst for this rally comes from Musk. $SpaceX (SPCX.US)$ In the company's first earnings call since going public,Musk clearly stated that the company would focus on using NVIDIA GPUs and spoke highly of the upcoming Vera Rubin platform.

SpaceX plans to expand its computing capacity from approximately 2 gigawatts by the end of 2026 to nearly 10 gigawatts by 2027. This computing power will be used for Grok, AI tools, satellite computing, and future orbital data centers. Wolfe Research analyst Chris Caso estimated that if this expansion plan is fully implemented, it could theoretically generate over $160 billion in potential incremental revenue for NVIDIA.

This figure spans multiple years of construction and should not be treated as near-term orders. However, it is already sufficient to shift market perceptions about NVIDIA’s demand ceiling.

The broader significance of this development lies in the competitive landscape.AMD had just reported a doubling of its data center revenue, and the market was expecting it to mount a stronger challenge to NVIDIA in the AI accelerator space. However, SpaceX’s decision to concentrate on NVIDIA GPUs has reminded investors that when large AI customers make comprehensive trade-offs among performance, software ecosystem, interconnectivity, and deployment efficiency, CUDA, NVLink, and full-system solutions still exhibit strong stickiness.

$Advanced Micro Devices (AMD.US)$ As a result, AMD’s stock dropped about 7% after the earnings announcement, while NVIDIA rose against the trend.

II. AI-related capex concerns are easing, and the market is repricing compute demand

For much of this year, the key factor weighing on NVIDIA's valuation wasn't an imminent drop in chip demand, but rather investor worries that cloud providers' AI investments wouldn't translate into cash flow, ultimately leading to a slowdown in capital expenditures.

Recent earnings from several large tech companies have gradually alleviated these concerns.

Microsoft reported cloud revenue of $59.3 billion for the latest quarter, up 27% year-over-year. Its quarterly capital expenditure reached $41 billion, with roughly two-thirds allocated to short-depreciation-cycle hardware like GPUs and CPUs. This indicates Microsoft continues to rapidly procure compute capacity, and these investments are now showing a clearer correlation with Azure growth, AI revenue, and the scale of commercial contracts.

$Amazon (AMZN.US)$ Microsoft is projected to spend approximately $200 billion on capital expenditures in 2026, primarily directed toward AI infrastructure. Alphabet previously guided for full-year capex between $175 billion and $185 billion. Adding $Alphabet-C (GOOG.US)$$Alphabet-A (GOOGL.US)$ 、 $Microsoft (MSFT.US)$ Amazon and $Meta Platforms (META.US)$ and $Oracle (ORCL.US)$ together, the market currently estimates these companies will collectively invest nearly $800 billion in AI-related capital expenditures by 2026.

The scale of capital expenditures alone doesn’t guarantee NVIDIA’s revenue growth. The truly favorable shift is that AI-related revenue, cloud business growth, and enterprise adoption rates are all improving in tandem. The market is beginning to accept a new view: the AI infrastructure cycle has not yet entered a contraction phase. Inference, AI agents, and enterprise deployments are now taking over from early-stage large-model training as the next drivers of compute demand.

III. Valuation recovery and fund reallocation have amplified this rally

NVIDIA’s recent price surge also clearly reflects underlying capital flows.

Before this rebound, NVIDIA was up about 13% year-to-date, while $PHLX Semiconductor Index (.SOX.US)$ it had risen nearly 61% over the same period. Its forward P/E ratio一度 dropped to around 18.9x, lower than $S&P 500 Index (.SPX.US)$ the approximately 20x level, and significantly below AMD's valuation of around 43x.

However, NVIDIA’s fundamentals remain strong, with its growth engine expanding from GPUs to a full suite of AI systems. NVIDIA’s revenue mix is evolving. The company is shifting from selling individual GPUs toward offering complete AI data centers comprised of GPUs, CPUs, switching chips, networking equipment, storage infrastructure, and software. As customers adopt GB200, GB300, or future Rubin racks, NVIDIA captures greater revenue per data center project. Gross margin guidance remains around 75%,indicating that Blackwell ramp-up, product mix, and supply chain efficiency have not shown noticeable deterioration.

For a company still delivering high revenue growth and maintaining a gross margin near 75%,this relative valuation discount is gradually attracting capital back.

Recently, AI stocks have broadly recovered, semiconductor short sellers are covering positions,and declining market concerns over Middle East tensions and interest rate risks have further amplified NVIDIA’s rebound. The five-day rally reflects both upward revisions to earnings expectations and previously underweight investors re-entering positions.

IV. How much upside remains? What key factors should be closely monitored going forward?

The market currently expects NVIDIA to report earnings of approximately $9.00 per share in fiscal year 2027 and around $12.90 in fiscal year 2028. At a share price of $219, this implies price-to-earnings (P/E) multiples of roughly 24x and 17x, respectively.

Wall Street’s current average price target for NVIDIA is approximately $308, implying about 40% theoretical upside from the latest share price of $219. However, analyst price targets tend to lag; thus, the combination of earnings forecasts and valuation remains more relevant for investment decisions.After five consecutive days of gains, NVIDIA still has room for mid-term upside, though its short-term margin of safety has clearly narrowed compared to before the rebound.

In a more optimistic scenario,Orders from SpaceX, sovereign AI initiatives, enterprise agents, and the China market could collectively drive upward revisions to earnings. It’s important to monitor whether SpaceX’s procurement plans translate into concrete orders. The market will focus on the pace of its computing capacity expansion, GPU delivery share, and related capital expenditure plans. At this stage, the $160 billion figure is largely a scenario-based estimate, with actual revenue recognition likely spread over several years.

A weaker scenario would involve cloud providers starting to rein in capital expenditures,Delays in Rubin deliveries or gross margins falling below the 73%–74% range. Under the dual pressure of downward earnings revisions and valuation contraction, the stock price could retreat back to the $180–$210 range.

What should we focus on next?

The next key milestone is NVIDIA’s Q2 FY27 earnings release on August 26 (covering the quarter ended July 2026 in calendar terms).The market needs confirmation on whether revenue exceeds the company’s guidance of $91 billion, whether Blackwell Ultra shipments are accelerating, and whether gross margins can hold steady around 75%. Second, attention will turn to the production and deployment cadence of Rubin. As Rubin ramps up in the second half of the year, NVIDIA’s product cycle will transition from the Blackwell series to the Rubin series. Any delays in the supply chain, packaging, HBM, or system integration could quickly impact earnings expectations.

Options strategies

$NVIDIA (NVDA.US)$ The technical picture currently shows a 'bullish golden cross' on short-term moving averages alongside 'overbought momentum indicators.' Following a strong rally, dense overbought signals combined with the price breaking above the upper Bollinger Band suggest significant near-term pullback risk, with the middle Bollinger Band at $205.4 serving as key support.From a medium-term perspective, the MACD has formed a golden cross and the 5-day moving average (MA5) has made multiple bullish crossovers. If the stock holds above the MA20–MA30 range ($202.6–$205.4) after a pullback, the medium-term rebound could continue. Key resistance levels to watch are the 60-day moving average at $208.5 and the upper Bollinger Band at $219.2; key support lies at the middle Bollinger Band ($205.4) and the 30-day moving average ($202.6).

1. Bear Put Spread—anticipating a short-term pullback due to overbought conditions

Suitable for:Investors who believe the market has become overheated in the short term after five consecutive gains and expect prices to decline, but anticipate limited downside.

This strategy involves simultaneously buying a put option with a higher strike price and selling a put option with a lower strike price, using the spread between the two puts to reduce option costs. If the underlying stock declines, the sold lower-strike put caps the maximum profit. If the underlying stock rises, the maximum loss is also limited.

(The chart below illustrates the simulated profit/loss profile of this strategy at expiration. The displayed graphic is for demonstration purposes only and does not constitute investment advice or guarantees; market conditions change rapidly, and the prices shown do not reflect real-time data.)

2. Cash-Secured Put – Wait for a pullback to acquire shares

Suitable for:

Investors who are bullish on NVIDIA over the medium term but do not wish to chase the price near $219; and who are willing to hold NVIDIA shares if the stock price breaks below support. If, at expiration, the stock price is above the strike price, the put option will not be exercised, and you can keep the entire premium. If the stock price falls below the strike price, you can still acquire the corresponding number of shares at your pre-set price.

If NVIDIA gaps down sharply due to policy changes, product delivery issues, or significantly disappointing earnings, investors will still be obligated to purchase shares at the strike price. Therefore, this strategy is suitable only for those who genuinely intend to hold the underlying stock and have fully reserved cash to cover the purchase. Naked put selling is not recommended.

3. Covered Call – Hold shares while waiting for consolidation at higher levels

Suitable for:

Investors who already hold at least 100 shares of NVIDIA, remain bullish over the medium term, but believe that after five consecutive gains, the stock may consolidate in the short term within the $219–$230 range and wish to enhance their position returns by taking advantage of overbought conditions.

As long as the stock price does not rise above this level, the underlying shares won't be called away, and you’ll keep the premium. However, if the stock price breaks above this level, you forfeit the additional gains your underlying shares could have achieved.

Note that a Covered Call does not effectively protect against downside risk in the underlying stock. The premium received only slightly lowers your cost basis; if the stock price falls to $205 or even lower, losses on the underlying position still occur. Another risk is capping upside potential. If new orders or product-related catalysts emerge ahead of earnings, driving the stock price rapidly above $235–$240, your position may be assigned early. Therefore, investors who are extremely bullish on NVIDIA breaking to new highs and unwilling to reduce their holdings should avoid using Covered Calls.

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Options Risk Disclosure:An option is a contract that grants the holder the right—but not the obligation—to buy or sell an underlying asset at a predetermined price on or before a specified date. Option prices are influenced by multiple factors, including the current price of the underlying asset, the strike price, time to expiration, and implied volatility. Implied volatility reflects the market’s expectation of future price fluctuations over the life of the option; it is derived by reverse-engineering the Black-Scholes pricing model and is commonly viewed as an indicator of market sentiment. When investors anticipate higher volatility, they may be willing to pay more for options to hedge their risk, resulting in higher implied volatility. Traders and investors use implied volatility to assess the attractiveness of option prices, identify potential mispricings, and manage their risk exposure.

Disclaimer:This content does not constitute an offer, solicitation, recommendation, opinion, or any form of guarantee regarding any securities, financial products, or instruments. The risk of loss in trading options can be substantial. In certain circumstances, your losses may exceed the initial margin deposit. Even if you place contingent orders such as 'stop-loss' or 'limit' orders, there is no assurance that losses will be avoided, as market conditions may prevent execution of these orders. You may be required to deposit additional margin on short notice. If you fail to meet such margin calls within the stipulated time, your open positions may be liquidated. You remain fully liable for any resulting deficit in your account. Therefore, prior to trading options, you should thoroughly research and understand how options work and carefully consider whether such trading aligns with your financial situation and investment objectives. If you trade options, you should become familiar with the procedures for exercising options and handling expiration, as well as your rights and obligations upon exercise or expiration. Options trading involves significant risk and is not suitable for all investors. Investors should carefully read"Characteristics and Risks of Standardized Options"。

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