Nvidia Valuation Gap Spurs $500 Billion Share Repurchase Call

Jim Cramer recently argued on CNBC that Nvidia should announce the largest share repurchase in corporate history, worth around $500 billion. He believes this move would address a valuation gap he finds 'indefensible', where the company trades at 23 times its earnings estimate despite growing like a startup.

Nvidia's latest quarterly revenue was $96.22 billion, up 105.85% year over year, with Data Center revenue growing 117%. Despite these impressive numbers, the stock has not moved in kind, lagging behind what triple-digit revenue growth would normally command.

Cramer's argument is that the forward multiple in the low twenties implies the market is pricing a demand cliff, which he believes is unfounded. However, management has disclosed $279 billion in supply obligations and partnerships with various companies to mobilize more than $500 billion in third-party capital.

The bearish thesis on vendor financing is real, but Cramer's read on the multiple is sound. The setup looks compelling on valuation, with the caveat that the customer-credit story is the risk worth watching closely.