I Correctly Predicted Nvidia Would Overtake Apple in Stock Buybacks and Dividends. Here's the Better Buy Now.

On Sept. 28, Nvidia (NASDAQ: NVDA) authorized a $150 billion increase to its share repurchase program, bringing the total to $235 billion. The new program is larger than Apple's (NASDAQ: AAPL) $100 billion additional authorization -- announced on April 30.

Nvidia is now on track to surpass Apple in buybacks and dividends, a prediction I made in mid-September. Here's what the buyback increase means for Nvidia investors, why Nvidia and Apple's investment thesis have a core similarity, and which growth stock is the better buy now.

Image source: Nvidia.

AI is contributing to Nvidia and Apple's cash flow

Nvidia is providing the chips and networking needed to fuel increased AI compute demand. In contrast, Apple's devices and services provide how many consumers, students, and enterprises will interact with AI tools. Because of their positioning along the AI value chain, both companies benefit immensely from AI spending.

By comparison, hyperscalers like Alphabet, Microsoft, and Amazon are draining their FCF as they spend heavily on AI. Anthropic and OpenAI depend on Apple as the touchpoint by which many users interact with their frontier models.

As AI use cases and overall compute demand increase, Nvidia and Apple won't be pressured to shell out record capital expenditures. Instead, they are well-positioned to convert AI-driven revenue into FCF, which fuels buybacks and dividends.

Apple tends to have the largest buyback program among U.S. companies. In its latest quarter, which was the third quarter of fiscal 2026, it spent $25.9 billion on buybacks and $4 billion on dividends -- ahead of Nvidia's $19.7 billion in buybacks and $6 billion in dividends in its latest quarter.

But Nvidia is growing its capital return program much faster than Apple. A year ago, in the second quarter of fiscal 2026, Nvidia's buybacks and dividends were a combined $10 billion.

Over half of Nvidia's free cash flow is going toward buybacks and dividends

Nvidia has a clearer path to growing its FCF than Apple. For fiscal 2028, Nvidia is already guiding for a 70% increase in revenue. And its margins should remain sky high thanks to insatiable demand for the Vera Rubin compute platform.

On its August earnings call, Nvidia said that it returned 60% of first-half fiscal 2027 FCF to shareholders, ahead of its 50% target. But going forward, it intends to increase the return of FCF net of strategic uses. Or, put another way, if Nvidia rakes in more FCF than it needs, the percentage of FCF returned to investors could increase.

Nvidia CEO Jensen Huang reaffirmed this plan in the Sept. 28 press release:

Nvidia's growth is being driven by a once-in-a-generation platform shift to AI and accelerated computing. Our cash generation gives us the capacity to invest in the technologies that advance this transformation and return capital to shareholders. This authorization reflects our confidence in the long-term opportunity ahead.

Nvidia's latest buyback increase comes just four months after it raised its dividend by 2,400%. Nvidia is now paying more in dividends than Apple. And I expect Nvidia to make another massive dividend increase -- whereas Apple has boosted its payout for 15 consecutive years but only by mid-single-digit percentage increases in recent years.

Nvidia has a 24.6 forward P/E compared to 38.3 for Apple

Nvidia's aggressive buyback program will reduce its share count, accelerating earnings-per-share growth and making the stock a better value. But it also signals that management continues to view buybacks as an effective use of FCF rather than expanding into new markets, aggressively acquiring other companies, or taking on unnecessary risk.

The vote of confidence makes sense, given Nvidia trades at just 24.6 times forward earnings despite being an incredibly profitable company with a long runway of future growth. By comparison, Apple features a 38.3 forward price-to-earnings (P/E) ratio -- and its P/E ratio based on trailing-12-month earnings is 38.8, also higher than Nvidia's 28.9.

Nvidia's investment thesis is centered around AI, whereas AI offers an opportunity for Apple -- but the business will be fine even if adoption hits some speed bumps. So risk-averse investors may still prefer Apple over Nvidia.

I think both stocks are good buys now, but Nvidia is a more compelling value. The company is less cyclical than it used to be and will likely generate a growing portion of revenue from upgrading its installed base in AI data centers rather than relying heavily on new infrastructure investments.

Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.