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Envidia Rocketship Comes Down to Lower Earth Orbit

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Published	Deadline	Asset
Fri Jan 31 2025	Sat Jan 31 2026	option
Sentiment	Risk To Reward	Jolt Maker
bearish	30%	sdadesky
Minimum Outlay	Jolt Guidance Cost	Max Loss Per Pos
$ 60	$ 25	$ 60
Min Gain Per Pos	Max Gain Per Pos	Duration
$ 100	$ 300	265 days
Optimal Conditions	Brokerage Conditions	Account Restrictions
Underlying price above 116.00	Ability to trade option spreads, both bullish and bearish, with defined risk.	Allowed in Regular and retirement accounts (IRA s)
Probability Gain
70%

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Rationale

This week, Envidia (NVDA) shares got pummeled, with shares dropping by nearly 17% on January 27, 2025. DeepSeek, a Chinese AI startup, recently launched a new AI model that caught the AI world by surprise. for Nvidia's high-end GPUs, which are pivotal to AI model training and inference. This efficiency challenge might lead to lower future revenue growth for Nvidia, as companies could opt for less resource-intensive AI solutions.

DeepSeek's open-souce model is certain to democratize AI, potentially disrupting the market further by allowing more players to enter without the high investment in GPU infrastructure previously seen as essential.
Description

Long term, I don't believe this will fundamentally alter Nvidia's long-term trajectory due to its established infrastructure and the broader AI infrastructure demands. But in the short to medium term these developments will introduce a lot of FUD in the market and drive down NVDA'S price off of its still high stock price multiples.
How low can it go? Check out the attached graph. I see NVDA dropping to $112 over the next months, then down to a low of $87 over the next half year. At that point I would expect it to resume its rise.

We've fashioned a play on this using an options strategy. For every $60 put at risk, you can reap a reward of maximum $340 over the next month. If you wish to participate in this trade and want guidance on how best to position yourself, this will cost you $25.00. Of course you can buy any multiple of this for the same cost of guidance, and most investors do.

Do not purchase the guidance unless you already have an options account set up. Make sure your broker allows you to do multileg strategies that have a defined risk. (straddles, calendars and butterflies). If you need help with a good broker, shoot us an email.

Also be aware that our trade will lose money (the amount you put up) if the price does not move lower over the next month, or if it ends up higher by the end of that time.
So you are risking 100% of your investment, for a possible reward 3 to 6 times that. We like these odds, and have already taken a position.

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