Nvidia is putting its cash behind its own stock. The chipmaker added $150B to its buyback authorization on Sept. 28, a record increase that sent shares higher and left it with $235B available for repurchases.
Earnings outpace the valuation
For a company at the center of the AI boom, Nvidia carries a surprisingly modest earnings multiple. LSEG puts it at roughly 16.5 times expected earnings over the next 12 months, its lowest since 2015 and well below its 15-year average of 30.
Estimates differ. Another valuation cited in coverage of the announcement puts Nvidia at 24 times forward earnings, against roughly 20 for the S&P 500. That’s a relatively small premium for one of corporate America’s fastest-growing companies.
The buyback gives shareholders a reason to pay attention to that gap. Repurchases can signal that management sees value in its shares, though the authorization alone doesn’t establish what the stock is worth.
Repurchases buck the corporate slowdown
Apple’s $110B authorization in May 2024 set the previous US record. Nvidia’s latest increase clears it comfortably and is larger than the entire market value of roughly 84% of S&P 500 companies, based on LSEG data.
It also comes as other companies pull back. US buybacks fell roughly 50% from July through Sept. 23, making Nvidia’s commitment stand out beyond its size.
The company expects to carry out the remaining program through fiscal 2028, which ends in late January that year. The authorization gives Nvidia room to buy. Its actual purchases will show how much of that room it uses.
Cash flow backs the commitment
Nvidia’s buyback plans depend on the cash still to come. Revenue more than doubled to $96.22B in the quarter ended in July, and management expects current-quarter sales to rise 90% to $108B. Its forecast calls for roughly 70% revenue growth in fiscal 2028.
The company finished July with $22.44B in cash and cash equivalents. The repurchase authorization stretches well beyond that balance, putting the focus on how much Nvidia expects to earn over the next several quarters.
"The real signal isn't the buyback itself. It's what the scale of the commitment says about how much cash Nvidia expects to keep generating through 2028."
David Wagner, Aptus Capital Advisors
Wagner sees the announcement as a vote of confidence while AI bubble concerns are resurfacing. Nvidia is telling shareholders it expects enough cash to keep investing and fund substantial repurchases.
Customers still control the spending
Delivering on that confidence depends partly on budgets Nvidia doesn’t control. S&P Global Ratings projected in August that combined hyperscaler capital spending would exceed $1.3T by 2027.
Those plans support demand for Nvidia’s chips. If cloud companies scale back their data-center investments, the cash available for buybacks could come under pressure, warns AvaTrade chief market analyst Kate Leaman.
She also points out that repurchases don’t necessarily reduce the share count dollar for dollar. Some purchases offset stock issued to employees. Shareholders will need to look beyond the authorization to see how much their ownership actually increases.
Huang is betting on staying power
Jensen Huang attributes Nvidia’s growth to the shift toward AI and accelerated computing. He says the company’s cash generation lets it invest in the business while returning capital to shareholders, rather than having to choose between them.
Critics would prefer more of that money to go toward hiring or research. Nvidia’s answer is that it can afford both investment and repurchases.
With a market value above $5.5T, Nvidia is the world’s most valuable public company, and its shares have risen this year. Management is still willing to commit more cash to buying them. Whether that looks well timed will depend less on the size of this announcement than on the orders its customers keep placing.
