Nvidia Adds $150 Billion to Buyback as CEO Huang Calls Stock Undervalued

At the time of the announcement, Nvidia's price-to-earnings ratio for fiscal 2028, which begins in February, was 14.5, below all of its megacap peers other than Micron, according to CNBC. Its average current P/E ratio over the past five years is 62.9, more than double its current level. The world's most valuable company, now valued at more than $5.5 trillion, has seen its stock rise 23% this year, topping the Nasdaq, but the share price has not kept pace with expected earnings growth.

Analysts on average expect Nvidia to report net income of close to $385 billion in fiscal 2028, up 60% from the prior year and more than fivefold over a three-year stretch, CNBC reported.

The buyback authorization adds to an $80 billion repurchase plan announced in May, when Nvidia also increased its quarterly cash dividend to 25 cents per share from 1 cent. Karan Ramchandani, managing director at Post Oak Group, said the latest buyback is a "clear-cut message" that management thinks its stock is undervalued. "If you look at the P/E ratio, the earnings are scaling up faster than the share price," Ramchandani said. "It's a very healthy mark of a company looking at their own stock buybacks as the best investment they could do in the coming year."

Nvidia shares rose almost 2% on Monday. The company also announced new software and hardware solutions to control AI agents. Nvidia is stepping up its capital return plans as revenue and cash flow surge because of demand for its graphics processing units used to build and run AI models and services.

Nvidia has signaled continued growth through early 2028, telling investors in August that it sees 70% sales growth in fiscal 2028, which implied the company will do hundreds of billions more in sales than Wall Street had previously forecast. Huang told investors at a Goldman Sachs conference earlier this month that Nvidia was "misunderstood" and implied it should be more highly valued for both its growth and its value measured by future earnings. "We are the world's first and only growth value stock," Huang said. "People are trying to figure out which one we are. We are both."

Huang has put the company's money behind that view after telling CNBC's Jim Cramer last month that "Buying back Nvidia stock is a tremendous opportunity." Nvidia previously said it planned to return about half of its free cash flow to investors through share repurchases and buybacks. Its share count could drop by 4% if the chipmaker spends its entire current authorization. "We're going to generate a lot of cash in the coming years," Huang said on CNBC's "Squawk Box" on Monday. "As we generate more cash, we'd like to be able to return it back to shareholders."

Gene Munster, managing partner at Deepwater Asset Management, told CNBC's "Fast Money" on Monday that investors appear worried growth rates will slow after a monstrous few years. "It's just really hard for investors to get comfortable that that's going to continue," Munster said. "That downward slope of growth rate, that's the reason why it trades at that compressed multiple."

Nvidia's fiscal 2028 P/E ratio is behind Apple at 35.5, Alphabet at 22.6, Microsoft at 21.7 and Amazon at 23.2 for a similar period, according to CNBC. It is also less highly valued than primary AI data center chip rivals including Broadcom at 18.2, Advanced Micro Devices at 38.2 and Intel at 54.7. None of Nvidia's rivals is forecasting 70% sales growth next year. Broadcom's silicon business is built around developing custom chips with companies such as OpenAI and Google. AMD competes with Nvidia in GPUs but with a small fraction of the market share. Intel makes central processors and has dabbled in AI chips but does not have a competitive product to Nvidia's GPUs.

Ben Reitzes, an analyst at Melius Research, has a buy recommendation on the stock and said it "deserves to be higher given its growth rate." "Buying back stock in a bigger and bigger way is going to really help it solve that problem and get a better valuation," Reitzes told CNBC's "Closing Bell" on Monday. UBS analysts said in a note on Monday that Nvidia's stepped-up share repurchases could add 8 cents per share to the company's calendar year 2027 earnings, which it estimates at $17.16.