The market's enthusiasm for NVIDIA is off the charts! Traders placed bets of over $20 billion on NVIDIA options last week!

NVIDIA has once again boosted the "AI faith" with strong performance. Traders placed bets of over $20 billion on options last week, with the most active option contracts betting that NVIDIA will rise to $800 to $850 in the short term.

On February 26, it was reported that in the past week, traders placed bets of over $20 billion on stock options related to NVIDIA, surpassing the total bets on Tesla, Meta, Microsoft, Apple, Amazon, and Alphabet-C.

The most popular are the bullish option trades on NVIDIA, as traders fear missing out on further gains. The volume of bullish option contracts on NVIDIA has surged to over 1 million since the release of NVIDIA's earnings report, reaching the highest level since November last year. The largest proportion of option contracts bet that NVIDIA will rise to $800 to $850 in the short term.

With the soaring stock price of NVIDIA, investors who bought bullish options have reaped substantial returns, further attracting more investors to join the bullish NVIDIA camp.

Henry Schwartz, Vice President of the Chicago Options Exchange, pointed out that there is a "snowball effect" around the bullish options on NVIDIA:

"As more and more investors participate, this trading activity becomes more active, forming a self-reinforcing trend."

Is NVIDIA's Rise Not Enough Yet?

Goldman Sachs has rated NVIDIA as the "most important stock on Earth," with the highest open interest in bullish options reaching up to $1,300, indicating that a 16% surge after NVIDIA's earnings report is not enough.

On Thursday, NVIDIA experienced a remarkable single-day surge, driving its market value up by $277 billion, marking the largest single-day valuation increase in history, surpassing Meta's recent $197 billion increase.

It is reported that recently, some exchanges have seen a surge in popularity of ETFs specifically designed to increase exposure to NVIDIA. An ETF called GraniteShares 2x Long NVDA Daily ETF, launched at the end of 2022, has attracted nearly half a billion dollars in net inflows. The fund has surged over 100% in 2024 and nearly 650% since its inception.

As of now, the popularity of this ETF remains strong, with a net increase of $263 million in the past month. The frenzy surrounding NVIDIA has also spread to other AI concepts. In the past month, the options trading volume of AMD has almost doubled the average level, with bullish options betting that its stock price could rise to $1000 (currently at $975.52). AMD's bullish options pair before Friday's expiration was almost in-the-money, becoming the stock with the largest options trading volume in the afternoon.

There is also strong demand for long-term options, indicating the market's optimistic outlook on AI concept stocks in the long run. The premium for NVIDIA's bearish options has dropped to the lowest level since October last year, while the premium for AMD's one-year bullish options relative to bearish options has surged to the highest level since May. The skewness of the one-month bullish options for VanEck Semiconductor ETF hovers near historical highs.

While tech stocks led by NVIDIA have been driving the market to new highs, Wall Street also sounds warnings, suggesting that this rally is very similar to the dot-com bubble of the early 21st century, with potential risks of a pullback. The surge triggered by NVIDIA's AI enthusiasm is just the early stage and won't last forever.

A report from Bank of America points out that the top 5 stocks in the US stock market have contributed to 75% of the S&P 500's gains so far. The top three tech stocks by market value account for 90% of the tech sector's gains to date - the concentration of the US stock market has reached its highest level since 2009.

JPMorgan also stated that the valuations of US tech giants are too high at the moment, with market gains relying on a few super-weighted stocks. In the face of uncertain macroeconomic and financial factors, once these few stocks experience a significant decline, the market will also shake accordingly.