Nvidia's record buyback bets the market is underpricing its earnings growth

Nvidia's board raised its share-repurchase authorization by $150 billion on September 28, pushing the total remaining balance to $235 billion through fiscal 2028 — the largest single buyback authorization in the company's history. The increase follows a quarter in which Nvidia posted record revenue of $96.2 billion, up 106% year over year.

The size of the authorization is notable set against the quarter's cash dynamics: free cash flow fell by more than half from the prior period, largely because accounts receivable and inventory tied to a new product launch grew by roughly $22 billion. Gabelli Funds analyst John Belton characterized the $235 billion authorization as consistent with roughly half of the free cash flow Nvidia is expected to generate over the next 18 months, a sign management is still underwriting sustained cash generation rather than offsetting a shortfall.

The buyback also lands as Nvidia's valuation multiples have compressed even while the stock has climbed. Shares trade near 24.8 times forward earnings and 28.9 times trailing earnings, with a PEG ratio of 0.48, implying earnings growth has outrun the share price. Neostellar Capital's Evan Schlossman noted that Nvidia's growth significantly outpaces the broader market while its forward multiple sits roughly in line with the S&P 500.

"Cash generation gives us the capacity to invest in the technologies driving the AI transformation while returning capital to shareholders." — Jensen Huang, CEO, Nvidia

For investors, the pairing of a shrinking near-term cash balance with the largest buyback in company history reads as a statement that Nvidia's board views the current price as undervaluing a growth rate it does not expect to slow — a bet that outsized AI infrastructure spending and shareholder returns are not, in fact, competing for the same dollar.