AI Stocks Are Crashing, but Smart Money Is Buying Nvidia and TSM

U.S. technology stocks came under heavy pressure on Friday as stronger-than-expected nonfarm payrolls data forced investors to reassess the Federal Reserve's policy outlook. Expectations for higher-for-longer interest rates intensified, sending growth stocks sharply lower. The $NASDAQ(.IXIC)$   fell over 4% intraday, while the $Philadelphia Semiconductor Index(SOX)$   plunged over 10%, making AI infrastructure names among the hardest-hit stocks in the market.

As of publication, $NVIDIA(NVDA)$   was down more than 6%, $Micron Technology(MU)$   had fallen over 13%, and $Marvell Technology(MRVL)$   had dropped more than 17%. After months of explosive gains, investors are increasingly questioning whether the AI trade is beginning to cool.

Yet while semiconductor stocks were being aggressively sold, the options market revealed two notable institutional trades pointing in the opposite direction.

Nvidia: Institution Bets on Up to 47% Upside Over the Next Three Months

Options flow data shows that a large investor simultaneously bought 31,000 Nvidia September 18, 2026 $255 call options and sold 31,000 September 18, 2026 $310 call options.

Both trades were marked as Opening and Multi-Leg, while trading volume far exceeded existing open interest, suggesting a newly established institutional position.

At the time of the trade, Nvidia shares were trading around $211. The position targets a price range between $255 and $310, implying potential upside of approximately 21% to 47% over the next three months.

Based on the execution prices, the investor committed roughly $16 million in net premium. If Nvidia reaches the $310 level before September expiration, the position's theoretical maximum return could approach 10x, highlighting strong institutional conviction in the stock's near-term outlook.

TSMC: Institution Deploys $22 Million Betting on 31% Upside

Meanwhile, $Taiwan Semiconductor (TSM.US)$ also attracted significant institutional activity.

According to the options flow, a trader bought 17,000 August 21, 2026 $480 call options while simultaneously selling 17,000 August 21, 2026 $560 call options.

Both trades were marked as Opening, Floor, and Multi-Leg, with volume significantly exceeding existing open interest, indicating the position was likely newly established.

Based on execution prices, the trade required approximately $22.6 million in net premium.

At the time of the transaction, TSM shares were trading around $427. The position targets a range between $480 and $560, implying potential upside of roughly 12% to 31% over the next two months.

If TSM reaches the $560 level before August expiration, the trade's theoretical maximum return would exceed 5x, reflecting continued institutional optimism toward AI infrastructure spending and demand for advanced semiconductor manufacturing.

A Bullish Signal Amid a Selloff

What makes these trades particularly noteworthy is their timing.

The semiconductor sector was experiencing one of its sharpest selloffs of the year. Strong labor-market data pushed Treasury yields higher, fueling concerns that elevated interest rates could pressure growth-stock valuations and prompting investors to reduce exposure to AI and semiconductor names.

Despite the negative macro backdrop, large institutional traders chose to establish bullish positions, betting on up to 47% upside for Nvidia over the next three months and up to 31% upside for TSM over the next two months.

For investors, these trades may offer an important signal. While macro concerns have triggered a valuation reset across AI-related stocks, some institutional investors continue to believe the AI infrastructure cycle remains intact and that the recent pullback has not altered the industry's long-term growth trajectory.

At least judging from the options market, smart money appears to believe that the AI trade is far from over.

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