Nvidia Buybacks: Chip Maker Approves $25 Billion Worth of Share Buybacks After Blockbuster Earnings Beat
Key takeaways
- Nvidia announced a $25 billion share buyback scheme as part of its fantastic earnings beat
- The buybacks take up around 2.1% of Nvidia’s monster valuation
- Nvidia shares gained 6% at the earnings report, but later pared back
Nvidia’s flying high on a second incredible earnings beat in a row, and investors cannot get enough of the world’s hottest chip maker. One move that did give Wall Street pause for thought was the announced $25 billion in share buybacks, intending to continue the scheme throughout the year. Perhaps that’s why Nvidia’s share price lost its gains on Thursday. Let’s dive in.
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What happened with Nvidia’s share buybacks?
As part of chip maker and AI darling Nvidia’s earnings report, which blew every metric going for it out of the water, the company also announced $25 billion in share buybacks, one of the most significant planned buybacks in the last ten years.
When a company repurchases its stock, buybacks can be a fruitful way to return capital to shareholders. The buyback schemes can benefit the share price, as it creates a scarcity effect, and can also help earnings per share.
It’s usually done when there’s been sluggish performance and growth from a company, so the move has somewhat puzzled investors. Nvidia has stated it intends to continue its share repurchase scheme throughout the year.
The buyback amounts to roughly 2.1% of its $1.2 trillion valuation. Other Big Tech titans have done even bigger share buyback schemes this year: Apple announced a $90 billion one, Alphabet had a $70 billion scheme and Meta unveiled a $40 billion share buyback scheme.
What’s the market reaction?
Nvidia’s earnings beat has sent the stock steadily climbing throughout the week, with the stellar earnings beat sending the share price up a further 6% during Thursday trading. During the session, the share price hit a new high of $502, topping a record from earlier in the week. However, those gains fell away, and Nvidia shares closed roughly where they were before the report.
Some investors took the profit after the earnings report triggered the rally. As part of the halo effect, the Philadelphia Semiconductor Index lost 3% while the Nasdaq closed 1.8% lower. Marvell and Nvidia rival AMD both lost 7% on Thursday. Nonetheless, Nvidia’s stock price has still gained 220% since the start of the year.
The bottom line
Nvidia is a blistering-hot stock to invest in, with many concluding that the company simply has too much money and decided to kick off a share buyback program. There’s no end to Nvidia’s dominance, with rivals left behind in the dust — which bodes well for the stock’s long-term future.
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