Cramer Sees $500 Billion Buyback Opportunity in 'Radically Cheap' Nvidia

Nvidia's stock has been deemed 'radically cheap' by CNBC host Jim Cramer, who believes the company should launch a massive $500 billion stock-buyback program. This would be comparable to Apple's strategy of using excess cash to reduce its share count.

Cramer argues that Nvidia's financial performance is accelerating, but its valuation has not kept pace with earnings growth. The chipmaker reported fiscal second-quarter revenue of $96.2 billion, a 106% increase from the previous year, and Data Center revenue jumped 117% to $89 billion.

TD Cowen analyst Joshua Buchalter agrees that Nvidia's shares are 'materially undervalued' and notes that demand could support substantially more revenue if supply were available. Bank of America analyst Vivek Arya also believes that Nvidia could return a higher percentage of its free cash flow to shareholders, which would offer real support for the company's stock.

However, some analysts argue that Nvidia's balance sheet has become part of its competitive strategy, with Rosenblatt analyst Kevin Cassidy noting that the company's use of its balance sheet to guarantee supply creates a 'powerful secondary competitive moat.' Cramer's proposal therefore rests on a bullish assumption: that Nvidia will generate enough cash to fund both share buybacks and strategic investments.