The AI Boom Just Fizzled - What’s Next?

NVDA hits $1,000, but the market reaction to Nvidia’s earnings says a lot.

Nvidia’s Q1 earnings just dropped, and guess what?

They didn't disappoint. With an earnings beat, a 10-for-1 stock split, and a 150% dividend increase. Wall Street is celebrating like it's a second Christmas, with analysts saying, “The party’s just getting started.”

After-hours, shares are up $50, hitting $1,000 for the first time. It’s impressive, but it raises a red flag.

The market had already priced in this news. This earnings beat was the weakest since Q3 2022, with EPS up 6% compared to last year's 27% average. Is this a one-off, or are we seeing a trend?

Last May, NVDA traded at $300. Today, it’s $1,000. If you think the party just started, you’ve had one too many shots.

This has been a one-stock market, with NVDA leading the charge. But remember, all hyped-up stocks eventually come back to earth.

So, what’s the play here?

Here’s what I think: we might see a sell-off with profit-taking after the talking heads pump today’s news.

If you’re bold, consider a risk-defined call credit spread. This strategy lets you profit from the expected cooling-off period.

It’s hard to step in front of this train, but all hyped-up stocks come back to gravity.

And if you disagree, that's what makes a market and you're always able to take the other side of the trade.

Good trading, and remember – rent's due.

Josh Belanger