Nvidia Urged to Launch Record-Breaking Stock Buyback Programme

Nvidia's stock price remains 'radically cheap' at around 23 times this year's earnings estimates, according to CNBC host Jim Cramer. He believes the chipmaker should launch a $500 billion stock-buyback programme, which would be large enough to retire about a tenth of the company.

This is similar to Apple's strategy, where the iPhone maker used excess cash to reduce its share count over several years. Nvidia has announced no such plan, but it ended fiscal Q2 with about $99.3 billion remaining under its existing repurchase authorisation.

Nvidia generated $21.34 billion of free cash flow during the July quarter and returned a record $26 billion to shareholders, including $19.7 billion through share repurchases. However, bank analyst Vivek Arya thinks Nvidia could go further by increasing its return ratio towards 50% to 75%, which he considers comparable to Apple's capital-return strategy.

Rosenblatt analyst Kevin Cassidy sees Nvidia's balance sheet as strategically valuable, arguing that the company's use of it to guarantee supply creates a 'powerful secondary competitive moat'. This raises concerns about whether Cramer's proposal makes sense, given Nvidia's heavy spending on securing future AI growth.