Nvidia approves record $150bn share buyback as AI competition pressures stock

Business, Markets & Finance

SAN FRANCISCO, United States (NPA) — Nvidia has authorised an additional $150 billion for share buybacks, its largest-ever repurchase approval, as the artificial intelligence chipmaker seeks to support shareholder value amid intensifying competition and concerns over the sustainability of the AI spending boom.

The latest authorisation takes Nvidia’s available share repurchase capacity to $235 billion, which the company expects to deploy through fiscal 2028.

The move surpasses Apple’s $110 billion share buyback authorisation in 2024, making Nvidia’s latest programme the largest such approval by a US company.

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Nvidia shares rose more than 2% following the announcement.

Despite its dominance of the AI-chip market, Nvidia’s shares have gained just over 20% this year through Friday, broadly matching the Nasdaq 100 but significantly trailing rivals Advanced Micro Devices and Intel.

AMD’s shares have more than doubled over the period, while Intel has gained more than threefold.

Investors question AI spending boom

The buyback comes as investors increasingly scrutinise the enormous capital spending by technology companies on artificial intelligence infrastructure.

Nvidia has been one of the biggest beneficiaries of the AI investment cycle, with demand for its high-performance processors generating substantial revenue and cash.

However, concerns have grown over whether technology companies can maintain their current pace of spending on AI infrastructure and whether the resulting returns will justify the investment.

Analysts said Nvidia’s decision to return more capital to shareholders reflects confidence in the durability of demand while acknowledging that the current pace of AI infrastructure expansion may not continue indefinitely.

“The AI buildout won’t continue at its current pace forever, but Nvidia is signalling confidence that demand for its hardware and services has staying power,” said Jacob Bourne, an analyst at Emarketer.

He said Nvidia’s strong cash generation currently gives it room to continue investing heavily in its business while also returning capital to shareholders.

Valuation comes under pressure

Nvidia was trading at about 16.5 times its 12-month forward earnings, according to LSEG data, its lowest forward earnings multiple since January 2015 and well below its 15-year average of about 30.

The decline in the valuation multiple reflects growing expectations that the company’s exceptional profit growth could moderate as competition in AI chips intensifies and customers reassess the scale of their infrastructure investments.

Ben Barringer, head of technology research at Quilter Cheviot, said Nvidia’s buyback strategy resembles Apple’s use of share repurchases to support its stock during periods when growth slows and valuation multiples come under pressure.

Nvidia has nonetheless maintained an aggressive growth outlook.

Last month, the company forecast about 70% revenue growth for fiscal 2028, providing investors with further confidence that demand for AI computing infrastructure could remain strong despite questions about the longevity of the current spending cycle.

Massive capital return

The scale of Nvidia’s latest buyback authorisation underscores the extraordinary cash generation produced by the AI boom.

The additional $150 billion is larger than the market value of roughly 84% of companies in the S&P 500, according to LSEG data.

Nvidia ended its July quarter with $22.44 billion in cash and cash equivalents. The company had previously announced an $80 billion share repurchase programme in May.

Chief Executive Officer Jensen Huang said the company’s cash generation gives it the financial capacity to continue investing in technologies driving the AI transformation while also returning capital to shareholders.

The latest buyback signals that Nvidia intends to use its substantial cash flows for two purposes simultaneously: funding the next generation of AI technology while increasing shareholder returns as competition and market expectations reshape the sector.