Nvidia Stock Shows No Quit Ahead Of Fiscal Q3 Results; Walmart Leads Parade Of Retail Reports

After a mixed October retail sales report Friday that showed big upward revisions to September data, a few top-performing retailers are next up on the earnings calendar. But most of the stock market's attention will be on Nvidia (NVDA), which continues to show strength ahead of the company's earnings report Wednesday after the close.

Nvidia stock has been biding time just below its Nov. 8 all-time high of 149.77. Nvidia has done a good job sidestepping some selling in the semiconductor sector. The Van Eck Semiconductor ETF (SMH) fell 2.2% in higher volume Monday, hurt by a 3.5% drop in Taiwan Semiconductor (TSM). Sentiment was negative in TSMC after the Biden administration told the company to stop shipping advanced artificial intelligence chips to China customers.

↑ X NOW PLAYING Wall Street Stays Bullish On Nvidia Ahead Of Earnings. Can the AI Titan Outdo Itself Again?

Meanwhile, several high-quality retailers are set to report results. Walmart (WMT) has been on a strong uptrend since clearing a base in mid-May. The catalyst at the time was a strong fiscal Q1 report. Walmart stock bounced off its 10-week moving average during the week ended Aug. 16, also on solid results. Results from Walmart are due early Tuesday, along with home-improvement giant Lowe's (LOW).

Leaderboard stock and riverboat cruise line operator Viking (VIK) also reports early Tuesday.

Nvidia Stock Ready To Run?

Nvidia shares have nearly tripled year to date, trouncing the S&P 500's return of around 25%. Several quarters in a row of triple-digit earnings growth have fueled the stock's price performance. To be sure, what Nvidia says about growth prospects going forward will mostly likely move scores of other AI and AI-adjacent stocks.

Earnings growth has exploded in recent quarters amid strong demand for the company's artificial intelligence chips. The proliferation of data centers has also been a boon for Nvidia.

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But investors sold the stock in late August even after Nvidia reported its fifth-straight quarter of triple-digit earnings growth. Fiscal Q2 revenue more than doubled to $30 billion. The results topped expectations.

Data center revenue, which includes the company's AI processors, surged 154% to $26.3 billion. Nvidia also raised its revenue guidance for the October-ended quarter to $32.5 billion, above the $31.7 billion consensus at the time.

Investors might've been concerned that gross margin weakened sequentially in the quarter to 75.1% from 78.4%. For its current fiscal year 2025, Nvidia said it expects gross margin to the be in the "mid-70% range," pretty much in line with the consensus at the time of 76.4%.

Nvidia sells to a lot of hyperscalers, or large cloud-service providers, like Microsoft (MSFT), Alphabet (GOOGL) and Meta Platforms (META). The company's H100 and H200 chips are used in most generative AI applications.

Blackwell Chip

Nvidia on Wednesday said Japan's SoftBank will be the first customer to use Nvidia's next-generation Blackwell chip. SoftBank plans to build the most powerful AI supercomputer in Japan.

As part of the company's Q2 report in August, Chief Financial Officer Colette Kress said: "We shipped customer samples of our Blackwell architecture in the second quarter, with production set to begin in the fourth quarter and continue into fiscal 2026. In fiscal Q4, we expect to ship several billion dollars in Blackwell revenue. Hopper demand is strong, and shipments are expected to increase for the rest of fiscal 2025."

Fiscal Q3 profit is expected to increase 85% to 75 cents a share, with revenue up 82% to $33 billion.

Watching Palo Alto Networks

On the heels of a bullish earnings report from security software firm Fortinet (FTNT), group peer Palo Alto Networks (PANW) is also on the earnings calendar. It also reports late Wednesday, along with Nvidia.

Earnings and revenue growth has decelerated in recent quarters at Palo Alto, yet the stock is near all-time highs. Earnings and revenue for the October-ended quarter (fiscal Q1) is expected to accelerate slightly from Q4, up 7% and 13%, respectively.

With a market capitalization north of $100 billion, Palo Alto isn't the growth engine it once was. But it's still widely regarded as a bellwether in the security software group.

Outside of the technology sector, other earnings reports to watch in the retail sector include BJ's Wholesale Club (BJ), Target (TGT) and TJX Companies (TJX).

Options Trading Strategy

A basic options trading strategy around earnings — using call options — allows you to buy a stock at a predetermined price without taking a lot of risk. Here's how the option trading strategy works, and what a call-option trade recently looked like for Nvidia.

First, identify top-rated stocks with a bullish chart. Some might be setting up in sound early-stage bases. Further, others already might have broken out and are getting support at their 10-week lines for the first time. And a few might be trading tightly near highs and refusing to give up much ground. Avoid extended stocks that are too far past proper entry points.

A call option is a bullish bet on a stock. Put options are bearish bets. One call option contract gives the holder the right to buy 100 shares of a stock at a specified price, known as the strike price.

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Once you've identified a bullish setup in the earnings calendar, check strike prices with your online trading platform, or at Cboe.com. Also, make sure the option is liquid with a relatively tight spread between the bid and ask.

Look for a strike price just above the underlying stock price — that's out of the money — and check the premium. Ideally, the premium should not exceed 4% of the underlying stock price at the time. In some cases, an in-the-money strike price is OK as long as the premium isn't too expensive.

Choose an expiration date that fits your risk objective. But keep in mind that time is money in the options market. Near-term expiration dates will have cheaper premiums than those further out. Buying time in the options market comes at a higher cost.

Nvidia Stock Option Trade

When Nvidia traded at around 148.50, a slightly out-of-the-money weekly call option with a 149 strike price and a Nov. 22 expiration came with a premium of around $6.90 per contract. That was 4.6% of the underlying stock price at the time and just above the 4% threshold of IBD's strategy.

One contract gave the holder the right to buy 100 shares of Nvidia at 149 per share. The most that could be lost was $690 — the amount paid for the 100-share contract. To break even, Nvidia stock would need to rise to 155.90, factoring in the premium paid.

The expected move in the options market for Nvidia, based on the at-the-money strike price of 148, was about 14 points up or down. This was determined by adding the at-the-money call premium to the put premium for the Nov. 22 contract, the expiration nearest the earnings report.

Follow Ken Shreve on X/Twitter @IBD_KShreve for more stock market analysis and insight.

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