Nvidia’s Share Buybacks: Optimism or Warning? Nvidia’s Share Buybacks: Optimism or Warning? Nvidia’s Share Buybacks: Optimism or Warning?

Nvidia’s Share Buybacks: Optimism or Warning?

Equities 4 minutes to read
Charu Chanana

Head of FX Strategy

Summary:  Nvidia’s $25 billion share buyback announcement has been puzzling investors on whether it indicates optimism around the company’s future stock price or whether it is a warning that the company is running out of suitable investment options. Another aspect to consider is the buyback yield, which for Nvidia still pales in comparison to its peers due to the recent run higher in its stock price.

Nvidia announced a $25 billion worth of buyback of its shares in its Q2 earnings, along with a stellar set of numbers and a robust outlook. This comes after its stock has more than tripled this year, and is close to a fresh all-time high. The buyback announcement caught markets off-guard as investors assessed the motive behind the move.

Companies commonly repurchase their stock as a way to return capital to shareholders, or when they think that the stock is cheap and company is undervalued. Such buybacks can benefit a stock's price by reducing the supply of shares. But given that Nvidia’s share price has had a great run this year and valuations are sky-high, many investors have been wondering if boosting the stock price was really one of the objectives for Nvidia to announce a share buyback.

Another reason for curiosity has been around the potentially massive investment capital needs for Nvidia, given the company is at the centre of AI research and development. That should have meant that Nvidia would have enough avenues to plough back its cash into rather than returning it to shareholders. Take for example the energy companies, that have returned massive amounts of capital to shareholders over the last few years, as they generated abundant profits due to high oil prices but their capital expenditure needs have been dwindling with the move towards ESG and non-fossil fuel based energy supplies. That puts Nvidia’s move in question, sending a warning signal about the AI potential from here. A case could be made given that Nvidia is generating tremendous amounts of cash, more than what they need for their current investment strategy, so they will continue to look for M&A opportunities (which may have some regulatory restrictions) or announce buybacks to use up excess cash.

While Nvidia’s $25 billion share repurchase plan is significant, roughly the same as its expected net income for FY 2024 (year ending January 2024), the amount is smaller than the buybacks announced by some of the other Big Tech and large growth companies. Apple, Chevron, Alphabet, Meta and Wells Fargo have announced buybacks of $90 billion, $75 billion, $70 billion, $40 billion and $30 billion, respectively this year. Looking at shareholder yield, or the ratio of total dividends paid out and net reduction in share capital over the past 12 months relative to the current price, Nvidia’s $25 billion repurchase translates to just over 2% from an average yield of under 1% over the long-term. Nvidia’s shareholder yield pales in comparison to that of S&P 500 at 2.58% and more so in comparison to that of Big Tech, with Apple’s at 3.2% and Alphabet’s at 4% currently.

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.