Nvidia has just announced a significant stock buyback—something that Jim Cramer has been advocating for quite some time. The chipmaker’s board approved an additional $150 billion for share repurchases, increasing the total remaining authorization to $235 billion. This is reportedly the largest increase in buyback history, and Nvidia aims to complete this program by fiscal 2028. As the company is currently in the third quarter of its fiscal 2027, this move is generating a lot of buzz.
“This is a very significant buyback,” Cramer mentioned on CNBC. He believes that, if Nvidia is proactive and consistently buying back shares, it could positively impact the stock’s trajectory. Following the announcement, shares rose nearly 3%, bringing their year-to-date rise to about 24%. That’s certainly a notable return, but given Nvidia’s pivotal role in the AI sector and its impressive financial numbers, many feel the stock performance should be even better. The company has more than doubled its adjusted earnings per share in consecutive quarters—an impressive achievement midway through the generative AI boom.
Projected earnings growth for fiscal 2027 stands at an astonishing 94%, up from 60% the previous year, according to estimates from FactSet. Yet, despite these promising figures, Nvidia ranks among the seven worst performers in the iShares Semiconductor ETF, which includes 30 different stocks. The entirety of the ETF, however, has risen 86% this year, which makes Nvidia’s underperformance all the more perplexing. This disconnect in performance is precisely why Cramer has been urging Nvidia to leverage its substantial cash reserves more aggressively for share buybacks. When a company repurchases its own shares, it lowers the overall number of shares outstanding, which can enhance the earnings per share for the remaining investors—if all other factors remain constant, of course.
Earlier this month, Cramer suggested Nvidia could even authorize buybacks up to $500 billion, drawing comparisons to Apple’s long-standing strategy of consistent share repurchases. Cramer recalled how former Apple CFO Luca Maestri would buy stock every day—and would buy more when the price dipped. Under CEO Tim Cook, Apple has repurchased over $800 billion in stock, reducing its share count by about 40%. If Nvidia were to adopt a similar approach, Cramer believes the stock price could rise dramatically.
It’s worth noting that Nvidia had already ramped up its buyback efforts before this latest announcement. Back in May, the board had greenlit an additional $80 billion in share repurchases without a set expiration date. According to FactSet, Nvidia bought back approximately $39 billion in stock during the first two quarters of its fiscal 2027, which is nearly equal to the entire buyback value from the previous fiscal year. In fiscal 2025, the company repurchased around $34 billion.
Nvidia is committed to returning at least 50% of its free cash flow to shareholders through buybacks and dividends. They increased their quarterly dividend from just a penny to 25 cents a share. While that equates to a relatively low dividend yield of less than 0.5%, it still reflects confidence in sustaining higher payouts in the future.
Moreover, Nvidia is using its financial strength to help bolster the broader AI landscape through investments and financing arrangements with customers working on AI infrastructure. This practice, however, has raised concerns about “circular financing,” where companies fund clients who, in turn, spend on their products. Despite the risks associated with these strategies, it doesn’t prompt us to abandon our position in the stock. With rising global demand for AI computing power, Nvidia’s chips can be redirected if any supported customer encounters difficulties.
Wall Street anticipates that Nvidia will generate about $440 billion in free cash flow over the next six unreported quarters, which is when they project the completion of the $235 billion buyback. “We’re going to generate a lot of cash in the coming years, and as we do, we intend to return it to shareholders,” said Nvidia CEO Jensen Huang during a recent CNBC interview.
For us, the expanded buyback program strengthens the rationale for investing in Nvidia. Although this latest $150 billion authorization falls short of Cramer’s $500 billion suggestion, it’s still a significant advancement. The company continues to reap benefits from extensive spending in AI infrastructure, and now has a potent tool to maximize that strength when stock performance doesn’t seem to reflect it.
