History Says Nvidia's Record $150 Billion Buyback Is Good News for the Stock

Nvidia (NASDAQ:NVDA) said on Monday, Sept. 28, that its board added $150 billion to the company's share repurchase authorization, taking the amount left to $235 billion. The chipmaker called it the biggest boost to a buyback authorization in history. It beats the $110 billion Apple (NASDAQ:AAPL) approved in 2024.

Investors liked the news. Shares gained about 2% on Monday as I write, trading near $230.

And history suggests they might have reason to. Apple's biggest buyback authorizations from 2018 through 2025 and Nvidia's own increases from 2023 through 2025 were each followed by a gain in the stock over the next 12 months. In eight of these nine cases, the stock beat the S&P 500 (SNPINDEX:^GSPC).

But I think the cash behind those buybacks did more of that work than the buybacks themselves.

Image source Getty Images.

A record authorization

With around 24.1 billion shares outstanding, Nvidia is worth about $5.5 trillion at around $230 a share. The full $235 billion would buy back a bit over 4% of the company.

Nvidia expects to spend the total remaining amount through fiscal 2028, which ends in January 2028 -- more than $40 billion a quarter over the roughly 16 months left.

That would more than double the current rate. Nvidia's buybacks have already risen, from $9.7 billion a year before to around $20 billion in each of the past two quarters.

Free cash flow for fiscal 2027's first half was $69.9 billion, 77% higher than a year before, or around $35 billion a quarter.

In other words, management is counting on lots more cash. CEO Jensen Huang linked the move to the company's "cash generation" in the announcement.

The stocks usually beat the market

Apple approved buyback authorizations of $90 billion or more in 2018, 2021, 2022, 2023, 2024 and 2025. (Its $100 billion authorization this April, like Nvidia's $80 billion boost in May, is too new to judge.) Measured from the close on each announcement day to a year later, Apple stock gained in all six periods and beat the S&P 500 in five.

The gaps were often wide. After the $100 billion authorization in May 2018, Apple shares climbed around 24% while the index rose about 10%. And after the $90 billion increase in April 2021, the stock gained over 22% versus about 2% for the index.

Nvidia's own record is even better.

Its board added $25 billion in August 2023, $50 billion in August 2024 and $60 billion in August 2025. Over the 12 months after each, the stock rose about 175%, 43% and 26%, respectively, versus gains of about 27%, 16% and 19% for the S&P 500.

Some of these wins were narrow, though. Apple beat the index by only about 2 percentage points after its 2025 authorization. And Nvidia's 2025 lead hinged on the last day of the window, when shares jumped after its next earnings report.

Is the buyback the reason?

Probably not on its own. After all, boards tend to approve big buybacks when cash is rolling in, and those gains likely came from the businesses making that cash.

Apple's only miss came after it announced a $90 billion authorization in May 2023, when its sales were shrinking. Apple's revenue for fiscal 2023, which ended Sept. 30, 2023, dropped 3%, and it was still down 4% year over year in the March 2024 quarter. Over the 12 months after the announcement, Apple shares rose about 11% while the S&P 500 gained about 26%.

Nvidia shows the other side. Its diluted share count for the fiscal second quarter of 2027, which ended July 26, 2026, was only about 1% smaller than a year before, despite almost $40 billion of buybacks over the fiscal year's first half. Earnings per share, meanwhile, more than doubled. At a company this big, buybacks change per-share results only a little.

Is the record buyback good news for Nvidia stock, then? I think it is, mainly because of what it says about the cash coming. Roughly doubling the buyback rate only makes sense if management expects free cash flow to keep rising.

Of course, Nvidia's stock may still trail the market over the next year. If artificial intelligence (AI) spending cools, that cash might fall short, and Nvidia doesn't have to use the full authorization.

But the price helps. Shares trade at around 15 times Nvidia's expected fiscal 2028 earnings, while Apple trades at about 36 times its expected earnings in fiscal 2027, which ends next September. Every dollar Nvidia spends on its own stock buys over twice the expected earnings that a dollar of Apple's buybacks does.

I'd consider buying the stock alongside the company at this price.

Daniel Sparks and his clients have positions in Apple. The Motley Fool has positions in and recommends Apple and Nvidia. The Motley Fool has a disclosure policy.