Nvidia holds $57 billion in cash, and Wall Street offers suggestions on how to spend it

Nvidia has accumulated $57 billion in cash reserves, and the amount continues to grow. Last week, the chipmaker announced an increase in its stock buyback program to a record $60 billion, once again sparking debate on Wall Street about whether such a move is reasonable for a company with a $4 trillion market capitalization.

In the first half of this fiscal year, Nvidia has already repurchased $24.3 billion worth of stock. The new $60 billion authorization expands on last year’s $50 billion buyback plan, which itself was double the $25 billion scale of the previous year.

When the $50 billion buyback plan was announced last year, analysts were already divided on its rationale. Now, the additional $60 billion plan is prompting even deeper discussion. Paul Meeks, Managing Director at Freedom Capital Markets, stated that he is not optimistic about high-growth tech companies conducting stock buybacks, especially those with the potential for sustained rapid growth.

“Nvidia’s cash flow is extremely abundant,” Meeks said, noting that the company’s capital expenditures are not high and that it boosts free cash flow through strategic acquisitions. Regarding stock buybacks, Meeks generally prefers companies to invest funds in other areas, such as developing new product pipelines, “because when AI infrastructure construction slows down, these reserves will be crucial.”

Meeks pointed out that Nvidia’s latest $3,500 Blackwell architecture robotic computer, Jetson Thor, shows the company is “clearly positioning itself as the leader in what Jensen Huang calls the physical AI field.” For a company with a $4 trillion market cap, Meeks believes buybacks have “limited impact,” although they may help avoid equity dilution caused by employee stock option exercises.

“In this situation, I would prefer the funds to be used elsewhere,” he said. The latest $60 billion buyback authorization has no time limit, which leads Meeks to believe the company may be “putting on a show—because the company is so large that even if the buyback is executed, the number of outstanding shares will not be significantly reduced.” He added that Nvidia may want to show: even with the stock price near historic highs, “we still believe there is room for further upside.”

Meeks has always been concerned that companies conducting large-scale stock buybacks may lack a sufficiently robust R&D pipeline. “Perhaps the most typical example right now is Apple,” he pointed out. The tech giant has seen sluggish revenue growth for four years, but by reducing the number of outstanding shares through buybacks, it can still achieve double-digit earnings per share growth, “gaining 5% to 6% growth from this move alone.” In May this year, Apple’s board approved an additional $100 billion common stock buyback plan, after launching a $110 billion buyback plan the previous year.

“I hope Nvidia truly has a product roadmap,” Meeks said, whether in autonomous driving or robotics. On the other hand, Louis Navellier, founder of asset management firm Navellier & Associates, believes Nvidia’s stock buyback is a wise move—especially against the backdrop of geopolitical tensions and uncertainty in its China business leading to a share price pullback. Navellier revealed that Nvidia is one of his largest holdings.

After Nvidia announced its second-quarter results, its stock price dipped slightly. The data center business slightly missed expectations, and the decision not to include the China market in the October quarter guidance may have contributed to the decline. Investors had hoped the company would clarify its policy direction after the Trump administration effectively banned sales of H20 chips to Chinese customers at the start of this quarter. Earlier this month, the U.S. government hinted that the ban could be lifted if Nvidia shared part of its revenue with the U.S.—but CFO Colette Kress said on the earnings call that “the U.S. government has not yet issued regulations codifying such requirements.”

Kress stated that due to ongoing “geopolitical issues,” the guidance did not include H20 chip revenue, but if tensions ease, $2 billion to $5 billion worth of H20 chips could be shipped in that quarter. Navellier said the $60 billion buyback plan may reflect the company’s confidence. “The board continues to approve buybacks, and the scale keeps expanding, which is a good sign.” In addition to strong cash flow, Navellier noted that Nvidia has “amazing” operating margins. Although margins are shrinking, “it’s coming down from a high of 70%,” he added.

CFRA Research equity analyst Angelo Zino said his team believes that as growth rates continue to slow and free cash flow improves, “cash returns to shareholders will gradually become a focus for investors.” Given that Nvidia is expected to generate over $100 billion in free cash flow over the next 12 months, Zino wrote that the chipmaker “will have extra cash to invest in areas it identifies as opportunities.”

Gil Luria, Head of Technology Research at D.A. Davidson, holds a similar view on Nvidia’s investment opportunities. “Now that they are already investing in growth and their ability to acquire other companies is very limited, stock buybacks become an important way to deploy available capital,” Luria wrote in a comment.

Dan O’Brien, COO of Futurum Group, said that Nvidia’s current and future free cash flow growth means the company “has to take some action, because shareholders won’t want to see huge amounts of cash just sitting on the balance sheet earning market rates.” He added that stock buybacks and private market investments are the “most reasonable choices” for the company’s capital allocation. Given that Wall Street’s expectations for Nvidia’s business and guidance remain high, O’Brien believes “there’s no better way to convey management’s confidence in the company’s long-term growth potential”—which suggests they believe the stock is undervalued in the long run.