Cramer Urges Nvidia to Launch $500 Billion Buyback

Jim Cramer urged Nvidia to launch a $500 billion stock buyback to retire roughly 10% of its shares, calling the shares ‘radically cheap’ at about 23 times this year’s earnings and saying there is ‘no better investment for NVIDIA than NVIDIA.’

Nvidia has not announced a program of that size. The company finished its fiscal second quarter with about $99.3 billion remaining under its current repurchase authorization. A $500 billion program would be more than five times that remaining authorization and would require many years of cash generation unless the company changed how it deploys capital.

Nvidia reported fiscal second-quarter revenue of $96.2 billion, up 106% from a year earlier. Data Center revenue rose 117% to about $89 billion. The company generated roughly $21.3 billion of free cash flow in the July quarter and returned a record $26 billion to shareholders during the period, including about $19.7 billion in share repurchases. CFO Colette Kress stated Nvidia returned approximately 60% of first-half free cash flow, above a stated minimum target of 50%.

Some analysts contend the shares could support larger buybacks. A TD Cowen analyst described the stock as ‘materially undervalued’ and said demand could support substantially more revenue if supply were available. A Bank of America analyst labeled current expectations for returning about 37% of future free cash flow as conservative and proposed increasing that ratio to between 50% and 75% to help support the shares.

Other analysts point to Nvidia’s use of its balance sheet to secure supply. Supply and capacity commitments rose from $119 billion to $279 billion in a single quarter, largely tied to memory and manufacturing capacity for current and future data-center products. A Rosenblatt analyst described the company’s guarantees of supply as a ‘powerful secondary competitive moat’ while maintaining a Buy rating and raising a target price.

The proposal presents a capital-allocation trade-off: funds used for repurchases would not be available to secure memory, manufacturing capacity, infrastructure or other strategic investments. Nvidia has not signaled plans for a repurchase program on the scale proposed. Analysts offer differing views on how much cash should go to buybacks versus capacity commitments, leaving capital allocation as a key issue for investors observing the company’s next steps.