Nvidia has authorised a record $150 billion share repurchase programme, lifting its remaining buyback capacity to $235 billion, the largest such commitment in U.S. corporate history. The announcement, made as part of the company's latest quarterly results, underscores the chipmaker's confidence in its cash generation and future earnings growth.
The new tranche alone surpasses Apple's previous record of $110 billion set two years ago, and at current valuations exceeds the market capitalisation of roughly 84% of S&P 500 members. Nvidia, now valued at about $5.3 trillion, has seen its shares rise 24% over the past year, yet the buyback signals that management believes the stock remains undervalued.
Cash Flow Supports Capital Returns
Chief Executive Jensen Huang tied the authorisation to the company's robust cash flow, pledging to return more capital to shareholders annually as cash generation grows. In the latest fiscal first quarter, operating cash flow reached $48 billion, up from $26.2 billion a year earlier, while free cash flow climbed to $46.4 billion from $24.9 billion. The company returned approximately $18.6 billion through buybacks and dividends in that quarter alone, and has committed to distributing at least 50% of free cash flow on a continuing basis.
Repurchase activity has accelerated sharply as artificial intelligence reshapes Nvidia's earnings. Buybacks climbed from roughly $10 billion four fiscal years ago to about $34 billion two fiscal years ago, and exceeded $40.4 billion last fiscal year. Over the past two reported quarters alone, the company has repurchased $39 billion of its stock, a pace that has outstripped the large-cap technology peer group since the start of last year.
Valuation at Multi-Year Low
The buyback comes as Nvidia's stock trades at about 29 times trailing earnings, its lowest multiple in roughly four years, compared with a five-year median of 55.9. The forward multiple, now about 24 times, sits modestly above the S&P 500's 20 times, even as Bloomberg estimates project earnings per share nearly doubling in the fiscal year ending early next year.
Analysts at Sunnov Investment Pte. Ltd. read the move as a statement about valuation as much as liquidity. Thomas Gardner, Director of Private Equity at Sunnov, noted that "a company able to fund its part of the AI infrastructure buildout and still retire stock at this pace is telling the market exactly how it values its own shares." Independent valuation work by GuruFocus puts intrinsic value at $379.7 per share against a recent price of $218.6, implying undervaluation of 42.4% at current levels. Consensus targets suggest 40% upside from last week's trading levels, with the most bullish estimate at $491.4.
Market Reaction and Forward Outlook
The market's initial response was positive but restrained, with shares up 2.8% in Monday's session yet still below their 52-week high of $225.7. That muted reaction suggests much of the extra return is already priced in after several quarters of visible cash generation. Retail sentiment on Stocktwits has stayed bearish since the announcement.
Order visibility underpins the board's confidence, with $113.6 billion of supply-related and $28.6 billion of multi-year cloud service commitments at the close of the latest fiscal first quarter. Data centre operations produced 91% of sales in the final quarter of the last fiscal year, with revenue of $59.5 billion marking a 75% rise year-over-year. Combined hyperscaler capital expenditure is projected to exceed $1.3 trillion by next year.
Gardner added that "when the multiple compresses while earnings accelerate, a buyback stops being a defensive gesture and becomes one of the highest-return uses of capital available to a board." The mechanics favour patient shareholders, as retiring stock spreads the same earnings across fewer shares, lifting earnings per share without operational improvement. Nvidia's share count has already fallen by about 1% over the past year, a pace the new authorisation looks set to quicken.
Warren Buffett has long argued that buybacks add most value when a stock trades below its intrinsic worth. With the gap between market price and assessed intrinsic value as the variable long-term investors should watch closely, Sunnov's analysis suggests that if cash continues to arrive at this rate, the more interesting question by next year will be whether $235 billion proves to be the ceiling.
This article is for informational purposes only and does not constitute financial advice.
