Options markets in the U.S. indicate that traders are anticipating a significant movement in Nvidia’s shares following the chipmaker’s earnings report on Wednesday. However, expectations for volatility are not as high as they have been in the past.

According to data from options analytics firm Trade Alert, Nvidia’s options suggest an 8.7% swing in either direction by Friday. This translates to a potential market cap swing of $200 billion, which is larger than the market capitalization of about 90% of S&P 500 companies.

Despite being substantial, this implied move falls short of the 16.4% jump in Nvidia’s shares seen after the company’s most recent quarterly earnings report. It is also less aggressive than the average 12% move that traders had anticipated in the last eight quarters.

Chris Murphy, co-head of derivative strategy at Susquehanna Financial Group, noted that volatility and expectations were higher during the previous earnings cycle.

Nvidia, which has seen its stock rise by about 87% this year, is considered a key player in the growing AI industry and boasts a market value of around $2.3 trillion. Wall Street is anticipating a strong quarterly report from the company.

Investor interest in the AI theme has expanded to other sectors in recent months, with BofA strategists highlighting its influence on power, commodities, and utilities.

While Nvidia is expected to drive a significant portion of the S&P 500 earnings growth over the next 12 months, compared to the previous 12 months, the upcoming earnings report is still expected to have an impact on the company’s share price.

Matt Amberson, founder of options analytics service ORATS, pointed out that implied volatility for out-of-the-money calls is similar to that of out-of-the-money puts, suggesting that options traders are not discounting the possibility of further upside for Nvidia’s stock.

Analysts anticipate Nvidia to report earnings of $5.59 per share and a rise in quarterly revenue to $24.65 billion from $7.19 billion a year ago.

Steve Sosnick, chief strategist at Interactive Brokers, emphasized the significance of Nvidia’s performance on the broader AI trade, suggesting that a significant downturn in Nvidia’s stock could test investors’ confidence in the sector.

“There is a lot riding on the AI trade,” Sosnick added.

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