When a company decides the best home for its spare cash is its own stock, it is saying something about what it believes those shares are worth. Yesterday NVIDIA (NASDAQ: NVDA) said it loudly, adding $150 billion to its share repurchase program. That comes on top of an $80 billion plan approved in May. The new money is the largest single buyback increase on record, and it lifts Nvidia’s total authorization to $235 billion. Chief Executive Jensen Huang had already told CNBC that buying back Nvidia stock was “a tremendous opportunity.”
A stock buyback is simpler than it sounds. A company uses its own cash to purchase its shares, usually on the open market, and then retires them or holds them in reserve. With fewer shares in circulation, every remaining shareholder owns a slightly larger slice of the business. A company’s board of directors approves the program and sets a maximum amount and an end date, but the company is not obligated to spend the full amount.
Companies buy back stock for a few reasons. The first is signaling. Executives know their business better than outside investors do, so buying shares suggests they think the price is too low. Karan Ramchandani, managing director at Post Oak Group, called Nvidia’s move a “clear-cut message” of exactly that. The second reason is arithmetic. Earnings per share equal net income divided by the number of shares, so reducing the share count raises that figure even when profit stays flat. Analysts at UBS Group AG (NYSE: UBS) estimate Nvidia’s larger repurchases could add 8 cents to its calendar 2027 earnings per share, which they project at $17.16.
Buybacks are also a way to return cash to investors. Unlike a dividend, a repurchase is not a taxable event for shareholders, and a company can slow its buying without the bad publicity that comes with cutting a dividend. Nvidia uses both tools, having raised its quarterly dividend from 1 cent to 25 cents per share in May. Critics argue buybacks can flatter per-share results without real growth and divert money from research or wages. Still, S&P 500 companies spent a record $1.02 trillion on buybacks in the 12 months ending September 2025, according to S&P Dow Jones Indices. The pace has cooled in 2026 as AI spending competes for cash. In the first quarter, buybacks rose just 1% from a year earlier while capital spending jumped 38%.
What makes Nvidia’s timing unusual is how inexpensive the stock looks for a company worth more than $5.5 trillion. The price-earnings ratio, which compares a share price with expected profit, is 14.5 for Nvidia’s fiscal 2028, which begins in February. That is lower than Apple (NASDAQ: AAPL) at 35.5, Alphabet (NASDAQ: GOOGL) at 22.6, Microsoft (NASDAQ: MSFT) at 21.7 and Amazon (NASDAQ: AMZN) at 23.2. Chip rivals Broadcom (NASDAQ: AVGO), Advanced Micro Devices (NASDAQ: AMD) and Intel (NASDAQ: INTC) all trade at higher multiples. Among its largest peers, only Micron Technology, Inc. (NASDAQ: MU) is cheaper. The stock is up 23% this year, yet earnings are climbing even faster.
The growth behind those earnings is hard to overstate. Nvidia told investors in August that it expects 70% sales growth in fiscal 2028, and analysts expect net income near $385 billion that year, up 60%. At a conference hosted by The Goldman Sachs (NYSE: GS) this month, Huang described Nvidia as “the world’s first and only growth value stock.” Not everyone is persuaded. Gene Munster of Deepwater Asset Management said investors struggle to believe growth at this pace will last, which keeps the multiple low. Ben Reitzes of Melius Research argued that bigger buybacks can help the stock earn the higher valuation he thinks it deserves.
Nvidia has said it plans to return about half of its free cash flow to shareholders, and using its full current authorization could shrink its share count by about 4%. Whether investors reward that confidence will depend on the earnings arriving as promised. For now, the company has decided that the most attractive investment in front of it is its own stock.
