Nvidia's $25-B Buyback Frazzles Stockholders

Nvidia's move to buy back $25 billion of its shares after its stock has more than tripled this year caught some investors off-guard, even as they cheered a stellar second-quarter report, Lewis Krauskopf, Chibuike Oguh and Lance Tupper reported for Reuters.

Nvidia's stock buyback - the fifth-biggest repurchase announcement among US-based companies this year, according to EPFR - surprised some investors. I Photo: NVIDIA Facebook

Shares of Nvidia touched a record high on Thursday, a day after the company blew past expectations with its quarterly revenue forecast as an artificial intelligence boom fueled demand for its chips.

Nvidia shares, which had run up in the days leading up to its report, climbed more than 6% on Thursday but pared gains to end the day little changed.

Nvidia's stock buyback - the fifth-biggest repurchase announcement among US-based companies this year, according to EPFR - surprised some investors. Companies commonly repurchase their stock as a way to return capital to shareholders.

Such buybacks can benefit a stock's price by reducing the supply of shares and increasing demand, and can boost earnings per share, a closely watched investor metric.

But while shareholders often see buybacks as an encouraging sign when a company’s stock appears cheap, Nvidia’s shares have shot up some 220% in 2023, leaving investors searching for the reasons behind the move.

"It's a little bit of a head-scratcher," said King Lip, chief strategist at Baker Avenue Wealth Management, which manages $2.5 billion in assets and counts Nvidia as a top-10 holding.

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