Jim Cramer, the outspoken CNBC host, has thrown down a bold challenge to Nvidia: use its massive cash pile to buy back $500 billion of its own stock. In his view, the chipmaker's shares are "radically cheap" at roughly 23 times forward earnings, and a repurchase of that scale would retire about a tenth of the company's outstanding shares.
Nvidia has not announced any such plan. As of the end of its fiscal second quarter, the company had about $99.3 billion remaining under its existing buyback authorization. But Cramer's suggestion has reignited a debate on Wall Street about how the AI giant should allocate its growing cash reserves.
The case for a mega-buyback
Cramer's logic is straightforward: Nvidia's earnings are accelerating, yet its valuation has not kept pace. In the July quarter, revenue hit $96.2 billion, up 106% year over year, while data center revenue surged 117% to $89 billion. He told CNBC that "no better investment for NVIDIA than NVIDIA" exists, arguing the company can fund its AI expansion while buying back far more stock.
Some analysts agree. TD Cowen's Joshua Buchalter described the shares as "materially undervalued," noting that demand could support substantially more revenue if supply were available. Bank of America's Vivek Arya also sees room for more aggressive capital returns, suggesting that lifting the payout ratio toward 50% to 75% of free cash flow "could offer real support" for the stock. He compared the opportunity to Apple's long-running capital return strategy.
The Apple comparison
Apple spent years using excess cash to reduce its share count, a move that boosted earnings per share and rewarded shareholders. Cramer believes Nvidia may be reaching a similar inflection point where buybacks become another source of returns. The company generated $21.34 billion in free cash flow during the July quarter and returned a record $26 billion to shareholders, including $19.7 billion in buybacks. CFO Colette Kress noted that Nvidia returned about 60% of first-half free cash flow, above its 50% minimum target.
Still, a $500 billion program would dwarf Nvidia's current authorization. It is more than five times the remaining buyback capacity and would require years of cash generation unless the company dramatically altered its balance sheet strategy.
The counterargument: AI capex needs
The strongest argument against such an enormous repurchase is that Nvidia's balance sheet has become a competitive weapon. Its supply and capacity commitments jumped from $119 billion to $279 billion in a single quarter, primarily tied to memory and manufacturing capacity needed to meet demand for current and future data center products.
Rosenblatt analyst Kevin Cassidy sees that spending as strategically valuable. In commentary reported by Benzinga, Cassidy said Nvidia's use of its balance sheet to guarantee supply creates a "powerful secondary competitive moat." Rosenblatt kept a Buy rating and raised its price target to $390.
That creates a capital-allocation trade-off. Money used to retire shares cannot simultaneously secure scarce memory, manufacturing capacity, infrastructure, or strategic investments across Nvidia's AI ecosystem. Cramer's proposal therefore rests on a bullish assumption: that Nvidia will generate enough cash to do both.
Investors watching the story may also want to track Nvidia's recent stock moves and the broader buyback and valuation debate. Meanwhile, Apple's new CEO faces an AI test as the company navigates its own capital return strategy.
This article is for informational purposes only and does not constitute financial advice.
