Companies can reward shareholders in numerous ways including making profits everyday – they can pay dividends or buy shares back. The way a share buyback works is every company trade on a Price/ Earnings per share multiple. If the number is the P/E Ratio is 10, if shares are bought back, the price/earnings falls and the price has increase to get back to the 10 P/E Ratio.

In an article by Anhata Rooprai of the Associated Press, one of the biggest buybacks will be done by Nvidia. The buyback authorized by the Board of Nvidia will be $150 billion which is higher than Apple’s $110 billion in 2024.

With strong demand for its pricey processors, generating billions in cash, Nvidia is using part of the windfall to boost its remaining buyback capacity to $235 billion, which it expects to deploy through fiscal,

Nvidia shares were trading at about 16.5 times 12-month multiple since January 2015, and well below the 15-year average of 30, according to LSEG data.

Ben Barringer, head of technology research at Quilter Cheviot, said the buyback echoes Apple’s playbook of using repurchases to support its stock as growth slows and valuation multiples come under pressure.

Stock buybacks have fallen 50%, the last growth was due to corporate tax cuts, the bulk of the money went into stock buybacks.

Nvidia forecast about 70% revenue growth for fiscal 2028, reassuring investors the growth of AI is expected to continue.

Nvidia ended the July quarter with $22.44 billion in cash and cash equivalents. In last announced a $80 billion share buyback in May.

Linking to dividend paying stocks, whether it is stock buyback or paying dividends, the beneficiary is the shareholder, but the premise is the company making profits. As long as the company is making profits, which is a good thing, some money can flow to shareholders and total return is important number to note.

There are more questions than answers, till the next time – to raising questions.