Nvidia buyback shows chipmaker stock is too cheap for Huang to resist
Nvidia has authorized an additional $150 billion for stock buybacks, signaling management's belief that the company's shares are undervalued despite its massive market valuation. The move follows a period of explosive growth in earnings driven by the global demand for AI-related hardware and software.
Why it matters
Nvidia's aggressive capital return strategy underscores the company's dominant financial position and the sustained profitability of the AI sector.
Nvidia CEO Jensen Huang is putting his company's money where his mouth is.
When the chipmaker announced a record stock repurchase on Monday, its share price was, by one key metric, at its cheapest level in a decade. Huang told CNBC's Jim Cramer last month that, "Buying back Nvidia stock is a tremendous opportunity."
Nvidia's price-earnings ratio for fiscal 2028, which begins this coming February, sits at just 14.5, below all of its megacap peers other than Micron . Its average current P/E ratio over the past five years is 62.9, more than double where it is today.
The constricted multiples for the world's most valuable company, now worth more than $5.5 trillion, reflect the sustained historic rate of profitability growth for the chipmaker powering the artificial intelligence boom. The stock is up 23% this year, topping the Nasdaq, but it's not keeping up with expected earnings growth.
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