Managing High-Beta Exposure Around NVIDIA Earnings

NVIDIA will report its next quarterly earnings in roughly two weeks, while general expectations around AI infrastructure spending, data-centre utilisation, and margin sustainability remain elevated.

While the long-term AI narrative continues to underpin the stock for NVIDIA, earnings events become even more sensitive given broader apprehensions about the ecosystem.

Strong Fundamentals, Elevated Sensitivity

NVIDIA remains central to the AI compute stack, with its GPUs embedded across hyperscaler data centres, enterprise AI workloads, and increasingly inference-heavy applications.


Source: TradingView

Revenue growth over recent years has been exceptional, supported not just by volume expansion but by sustained pricing power and operating leverage.

Consequently, this success has amplified the stock’s sensitivity to expectations. NVIDIA’s rolling beta to the broader market remains elevated, reflecting both its growth profile and its role as a proxy for AI capital expenditure more broadly. Earnings reactions, therefore, tend to be sharper than those of the broader indices, particularly when positioning and implied volatility are already high into the event.


History shows that even in periods of consistent earnings beats, price reactions around results are not symmetric: upside is often more measured, while downside can be abrupt if guidance, margins, or order visibility disappoint.

Why Index-Based Hedging Matters Around Earnings

Single-stock options are the most direct way to hedge earnings risk, but they also tend to be the most expensive around results. Implied volatility typically peaks into the event, raising the cost of protection precisely when it is most needed.

An alternative approach is beta hedging, using a broader index instrument to offset the portion of NVIDIA’s risk that is driven by market-wide and factor-based moves rather than idiosyncratic fundamentals.

For NVIDIA, a significant share of short-term drawdowns during earnings could coincide with broader risk-off, even when the company’s long-term outlook remained intact. This makes index hedging a useful, cost-efficient tool when deployed thoughtfully.


Source: FactSet

The S&P 500 also enters the upcoming earnings window with expectations already elevated. According to FactSet, analysts are projecting full-year 2026 earnings growth of 14%, with quarterly growth accelerating from 11.3% in Q1 to over 15% by Q3–Q4.

Compounding this sensitivity is a stretched valuation profile: the S&P 500’s forward 12-month P/E stands at 21.5x, above its 5-year (20.0x) and 10-year (18.8x) averages. This combination of strong growth expectations paired with elevated multiples could increase index sensitivity to earnings disappointments from large contributors.

NVIDIA, though, stands out as the single largest contributor to earnings and revenue growth among S&P 500 companies with significant international exposure. FactSet notes that, excluding NVIDIA, earnings growth for internationally exposed firms would fall materially, underscoring how concentrated index-level growth has become.


And although NVIDIA remains a dominant contributor to recent index returns, historical earnings reactions suggest that post-earnings volatility in the stock has increasingly resulted in rotation rather than broad market drawdowns.

In several recent quarters, periods of NVIDIA post-earnings weakness were followed by relative resilience or even outperformance in the S&P 500, as leadership broadened beyond a narrow set of growth names.


Source: CME QuikStrike

From a positioning standpoint, there is a significant build-up of put options for the MES options, with the contract expiring a couple of days after NVIDIA’s earnings. Call interest at 7,250 is high, but is still outweighed by puts, especially around the 6,500 strike level.


Source: CME QuikStrike

Over the past session, though a considerable number of puts were closed, with added OI much more favourable for OTM calls around 7,100, as well as in the money calls around the 6,750 strike.

Under normal market conditions, using MES as a hedge to reduce beta exposure around earnings is a compelling strategy. However, with the most recent changes in options OI for MES futures, the positioning resembles the trends observed in recent historical data regarding the spread between the index and NVIDIA.

Using CME Micro E-mini S&P 500 Options as a Hedge

CME Micro E-mini S&P 500 (MES) options offer a flexible and capital-efficient way to hedge NVIDIA earnings risk: each Micro contract represents one-tenth the size of a standard E-mini, allowing for precise sizing, and liquidity is deep across short-dated expiries.


During Q2 2024, NVIDIA shares declined over 6% in the month following earnings, while the S&P 500 rose almost 2%.

A portfolio combining NVIDIA exposure with a modest MES futures position would have experienced significantly lower volatility than a standalone NVIDIA position, highlighting how index exposure can act as a volatility absorber during single-stock earnings events.

Historical illustration
● Instrument: Micro E-mini S&P 500 Futures
● Index performance: +1.43% over 28 days (and 4.80% over 84 days)
● Entry Level: 5,760
● Exit Level: 5,843 (28 days) and 6,054 (84 days)
● Net index move: 83 index points (28 days) and 296 index points (84 days)

P&L for the MES Futures position: 83 index points × USD 5 per index point = USD 415 per MES contract.

The USD 415 would have offset the losses on the NVIDIA position, while holding it for 84 days would have added USD 1,480 to the gains from NVIDIA’s 9.55% rally over the same period.

For larger portfolios or institutions seeking greater notional exposure, E-mini S&P 500 (ES) futures can be used in place of MES futures, offering the same index exposure with a larger contract multiplier.

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