• Options imply 6% swing in Nvidia shares post-earnings

• Chipmaker's earnings pose test for the AI trade

• Traders eying Nvidia results to see if $4 trillion market valuation is justified

Options traders are pricing in about a $260 billion swing in Nvidia's market value following the chipmaker's second-quarter earnings expected on Wednesday, U.S. options market data showed.

Nvidia options implied a roughly 6% swing for the shares in either direction following the results, which will be reported after markets close on Wednesday, according to the data.

That is below the 7% long-term average move, suggesting that investors may now have a better handle on what to expect as the company matures.

"The ripples out of Nvidia might be more interesting than the actual move for Nvidia," said Chris Murphy, co-head of derivatives strategy at Susquehanna, a market maker. "A lot of these really high-flyer, speculative AI names have come off a lot, but Nvidia is basically back right below its all-time high."

Should the chipmaker's results exceed expectations, Murphy said that would "support some of the harder hit, more speculative areas of the AI trade."

Over the last 12 quarters, Nvidia's implied earnings move averaged 7.7%, while the average actual move was closer to 7.6%, according to data from ORATS.

After a huge rally that helped lift markets this year, the technology sector pulled back a bit this month on fading enthusiasm for those stocks.

Traders are now eying Nvidia earnings to see if its $4 trillion market valuation is justified. Additionally, the potential impact on its forecasts from a recent revenue-sharing deal with the U.S. government will be closely watched.

Shares of Nvidia, the semiconductor giant at the heart of the AI trade, have gained about 34% this year, and closed up 1.02% on Monday at $179.81. The S&P 500 .SPX fell 0.43% to 6,439.32 on the day and was up 9.5% year-to-date.

"It's been (on) an amazing run," said Matt Amberson, founder of ORATS. "It's just a Goldilocks time for Nvidia."