Nvidia NVDA shares rose over 3% at market open on Monday after the chipmaker unveiled a record $150 billion share buyback, underscoring the extraordinary cash generation being driven by the artificial intelligence boom.
The share received a boost despite broader markets remaining weak over rising oil prices and bond yields, with the 10-year Treasury yield gaining to 5.23%.
The authorization is the largest-ever addition to a US company’s stock repurchase program, surpassing Apple’s $110 billion buyback approval in 2024.
Nvidia’s new authorization brings its remaining repurchase capacity to $235 billion, which the company expects to deploy through fiscal 2028.
“NVIDIA’s growth is being driven by a once-in-a-generation platform shift to AI and accelerated computing,” said Jensen Huang, founder and CEO of NVIDIA.
“Our cash generation gives us the capacity to invest in the technologies that advance this transformation and return capital to shareholders. This authorization reflects our confidence in the long-term opportunity ahead.”
Nvidia’s cash generation fuels massive buyback
The scale of the authorization highlights how rapidly Nvidia’s financial position has changed alongside the AI investment cycle.
The company generated almost $100 billion in free cash flow in its most recent financial year, which ended in January.
Consensus estimates from S&P Global’s Visible Alpha suggest that figure could more than triple to $329 billion by fiscal 2028.
Nvidia ended its July quarter with $22.4 billion in cash and cash equivalents, while its net income is forecast to more than double to $245 billion in the current financial year.
Visible Alpha estimates that profit could rise further to $387 billion in the fiscal year ending January 2028.
The buyback therefore gives Nvidia a mechanism to return a portion of those anticipated cash flows to investors while continuing to finance its expansion and investments in AI.
Valuation reflects growing questions over AI growth
Large buyback authorizations can signal that management believes its shares are attractively valued.
They are also often associated with mature companies whose growth has begun to moderate.
Despite the strength of its financial outlook, Nvidia’s shares have faced questions over how much of its future growth is already reflected in its valuation.
The stock was recently trading at about 16.5 times 12-month forward earnings, according to LSEG data.
That is its lowest level since January 2015 and significantly below its 15-year average of about 30 times earnings.
Some analysts view the compression in the multiple as evidence that investors have become more cautious about the pace and durability of Nvidia’s profit growth.
One concern is pressure on gross margins.
Nvidia’s gross margin was 75% last quarter, but Bloomberg-compiled analyst estimates indicate that it could fall below 72% by the fourth quarter before recovering.
Higher costs for critical components, including memory chips, are contributing to the pressure.
Nvidia is also facing a changing competitive landscape as some of its largest customers develop their own AI silicon.
David Russell, global head of market strategy at TradeStation, has highlighted the growing threat from customers designing chips internally.
Meta Platforms and Alphabet are among the major Nvidia customers pursuing their own AI processors, potentially reducing their dependence on Nvidia over time.
“Multiples expand when companies are well positioned with potential to get better, and Nvidia doesn’t offer that,” Russell said in an earlier Bloomberg report.
Huang has pushed back against the more cautious assessment of Nvidia’s future.
At a Goldman Sachs technology conference earlier this month, he described Nvidia as “the world’s first and only growth value stock” and called the company “incredibly misunderstood.”
Buyback comes as Nvidia forecasts continued growth
The record repurchase authorization arrives as Nvidia attempts to reassure investors that the AI spending cycle has further room to run.
Last month, the company forecast approximately 70% revenue growth for fiscal 2028, addressing concerns that the extraordinary expansion of AI infrastructure spending could eventually slow.
Its sales are forecast to increase by about 90% this year, with major AI companies including OpenAI, Anthropic and SpaceX among its customers.
Google is also a significant Nvidia buyer through its cloud business despite developing its own AI chips.
Nvidia has also invested in AI startups and cloud providers, a strategy that has attracted scrutiny from some investors over whether such investments can indirectly support demand for its chips.
The comparison with Apple is notable.
When Apple authorized its $110 billion buyback in 2024, the iPhone maker held all five of the top spots for the largest US corporate repurchase authorizations, according to Bloomberg.
Apple’s smartphone growth had slowed, but its enormous profitability enabled it to return substantial amounts of capital to shareholders.
Nvidia, by contrast, is still in a period of rapid expansion.
Its expected $329 billion in free cash flow by fiscal 2028 and projected $387 billion in net income underline the scale of the opportunity that the company believes lies ahead.
The $150 billion authorization consequently represents more than a capital-return decision.
It is also a statement from Nvidia’s management that the AI infrastructure boom can generate sufficient cash to fund continued investment while returning significant sums to shareholders.
For investors, the question now is whether Nvidia’s extraordinary cash generation and projected growth can continue to offset margin pressures, customer competition, and a rapidly evolving AI chip market.
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