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What You Need to Know About NVIDIA ETFs Ahead of Earnings

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Ahead of NVIDIA's (NVDA - Free Report) earnings release on Wednesday, traders are anticipating a significant movement in the company's shares, with lower volatility expectations compared to the previous quarters. Options data firm Trade Alert suggests an anticipated swing of 8.7% in either direction, translating to a potential $200 billion market cap shift, as quoted on Reuters.

While the figure seems huge, this projected move falls short of past volatility, which included a 16.4% surge in NVIDIA’s shares following the last earnings report. Notably, optimism surrounds NVIDIA as a key player in the AI industry, with its shares up about 97% this year (read: Should You Play NVIDIA Earnings with Bullish ETFs?).

Crucial NVIDIA-Dell Partnership

NVIDIA CEO Jensen Huang recently highlighted the partnership with Dell Technologies as important for spreading AI capabilities across various industries. The collaboration aims to enable businesses and organizations establish their own "AI factories," leveraging NVIDIA's technology alongside Dell's infrastructure solutions.

Dell is one of the largest providers of computing infrastructure to government agencies and businesses — a market that NVIDIA doesn’t directly serve, per a Bloomberg article. NVIDIA’s clientele mostly included other big techs like Microsoft MSFT, Meta Platforms META, AMZN and Alphabet GOOGL.

NVIDIA now aims to integrate its technology into diverse sectors, from drug discovery to shipbuilding, as well as various agencies positioning itself as a leader in the AI space. For that, NVIDIA requires Dell’s storage, networking and computing. While NVIDIA currently focuses on graphics chips for PCs, speculation is rife that the company may make an entry into producing central processing units.

Anticipated Quarterly Performance

NVIDIA is expected to post massive earnings and revenue growth of 402.75% and 237.47%, respectively, for the to-be-reported quarter. NVIDIA has presented a solid earnings surprise history, as it delivered an earnings surprise of 20.18%, on average, in the last four quarters.

Overall AI Trades Under Close Watch Ahead of NVIDIA Earnings

Any downturn in NVIDIA's shares post earnings could put broader investor confidence in the overall AI trade to the test. Although the AI rally has been diversified, NVIDIA remains a defining factor for the near-term rally, and its performance could influence market sentiment toward AI-related investments.

Investors should note that BofA’s strategists expect the company to drive 9% of the S&P 500 earnings growth over the next 12 months compared to 37% over the last 12 months, as quoted on Reuters.

ETFs in Focus

ETFs having the largest allocation to NVIDIA could make compelling plays in light of its upcoming earnings as the basket approach minimizes the company-specific risks. These ETFs include Strive U.S. Semiconductor ETF (SHOC - Free Report) , VanEck Vectors Semiconductor ETF (SMH - Free Report) , Grizzle Growth ETF (DARP - Free Report) , TrueShares Technology, AI and Deep Learning ETF (LRNZ - Free Report) and Invesco PHLX Semiconductor ETF (SOXQ - Free Report) .

Investors should also note that NVIDIA’s huge surge has drawn attention to single-stock ETFs that aim to double its daily return.TheGraniteShares 2x Long NVDA Daily ETF (NVDL) and the T-Rex 2X Long NVIDIA Daily Target ETF (NVDX) will thus be under close watch pre and post earnings release. However, these instruments are suitable for short-term trading and are associated with high volatility.

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