Nvidia is dramatically expanding its share buyback program after a surge in earnings left the world’s most valuable company trading at a valuation that, on forward earnings, is unusually low compared with both its own history and several other megacap technology companies.
The chipmaker on Monday authorized an additional $150 billion for share repurchases, on top of the $80 billion program announced in May. The move comes as Nvidia’s revenue and cash flow continue to expand on demand for the graphics processors that power the artificial intelligence boom.
At the time of the announcement, Nvidia’s price-to-earnings ratio based on fiscal 2028 earnings was about 14.5, according to the figures cited in the report. That was below every other megacap peer except Micron and far below Nvidia’s average current P/E ratio of 62.9 over the previous five years.
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The contrast is striking because Nvidia’s shares have still gained about 23% this year, pushing the company’s market value above $5.5 trillion. The stock’s rise, however, has been considerably slower than the pace at which analysts expect its earnings to grow.
Wall Street analysts expect Nvidia’s net income to approach $385 billion in fiscal 2028, representing a 60% increase from the previous year and more than a fivefold increase over three years.
That divergence between earnings growth and the stock price is the central argument behind Nvidia’s aggressive capital-return strategy.
“The P/E ratio, the earnings are scaling up faster than the share price,” said Karan Ramchandani, managing director at Post Oak Group. He described the buyback as a “clear-cut message” that management believes the shares are undervalued.
The company is effectively using a portion of the cash generated by the AI boom to buy back ownership in itself at a valuation it considers attractive.
The Growth Debate is Squeezing Nvidia’s Valuation
Nvidia’s unusually low forward multiple does not necessarily mean investors have turned negative on the company. Instead, it highlights how expectations for future growth have become the dominant factor in determining its valuation. The company has experienced extraordinary expansion since the generative AI boom accelerated demand for its GPUs. Investors now face a different question: how long can that growth rate continue?
Nvidia told investors in August that it expects 70% sales growth in fiscal 2028, a forecast that implied hundreds of billions of dollars in additional revenue compared with previous Wall Street estimates. Yet the market is applying a much lower earnings multiple to those future profits than it has historically assigned to Nvidia.
Gene Munster, managing partner at Deepwater Asset Management, said investors remain concerned that Nvidia’s growth rate will eventually slow after several years of exceptional expansion.
“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.”
That situation explains why Nvidia can simultaneously produce extraordinary earnings growth and trade at a valuation that appears inexpensive relative to its own history.
CEO Jensen Huang has argued that investors are failing to account for both sides of the company’s profile.
“We are the world’s first and only growth value stock,” Huang said at a Goldman Sachs conference earlier this month. “People are trying to figure out which one we are. We are both.”
The buyback gives that argument a financial dimension. Rather than simply asking investors to accept management’s growth outlook, Nvidia is committing a substantial amount of its own capital to repurchasing shares.
Huang had already told CNBC’s Jim Cramer last month that buying back Nvidia shares represented a “tremendous opportunity.”
Nvidia has previously said it intends to return roughly half of its free cash flow to shareholders through repurchases and dividends. If the company eventually uses the full current authorization, its share count could decline by about 4%.
“We’re going to generate a lot of cash in the coming years,” Huang said Monday. “As we generate more cash, we’d like to be able to return it back to shareholders.”
The company also raised its quarterly dividend to 25 cents per share from 1 cent in May, although the buyback remains the much larger component of its capital-return strategy.
Nvidia Is Cheaper Than Most AI Chip Rivals
Nvidia’s forward valuation also stands out against its major technology and semiconductor competitors.
Based on the comparable fiscal period, Apple trades at about 35.5 times earnings, Alphabet at 22.6, Microsoft at 21.7, and Amazon at 23.2. Among major AI chip companies, Broadcom trades at roughly 18.2 times earnings, AMD at 38.2 and Intel at 54.7.
Nvidia’s 14.5 multiple is therefore unusually low despite the company’s dominant position in AI accelerators and its expectation for 70% sales growth in fiscal 2028.
The comparison also needs context. Broadcom is expanding its custom silicon business through partnerships with companies including OpenAI and Google. AMD competes directly with Nvidia in GPUs but has a much smaller share of the market, while Intel remains primarily focused on CPUs and has struggled to establish a comparable position in AI accelerators.
None of those rivals is forecasting a growth rate comparable to Nvidia’s projected 70% sales increase.
Ben Reitzes, an analyst at Melius Research, said Nvidia “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 said.
The mechanics of the buyback can also amplify earnings per share if Nvidia’s earnings continue rising while the number of shares outstanding falls. UBS analysts estimated Monday that the expanded repurchases could add about 8 cents to Nvidia’s calendar 2027 earnings per share, which they estimate at $17.16.
The more important issue, however, is whether Nvidia can maintain the earnings trajectory that has made the current valuation appear compressed.
The company is committing more capital to repurchases at precisely the moment when investors are debating whether the extraordinary economics of the AI infrastructure boom can persist. If earnings continue to expand at the pace Nvidia forecasts, fewer shares would allow each remaining share to represent a larger claim on those profits.
But the buyback itself cannot resolve the underlying question about demand. Nvidia’s valuation ultimately depends on the durability of spending by hyperscalers and other customers building AI infrastructure, the pace of new AI model development, and the company’s ability to maintain its technological lead as competitors introduce alternative processors.
Currently, Nvidia is betting that the market is underestimating the duration and scale of its earnings growth. The $150 billion authorization is the clearest financial expression yet of that view.