Why Jim Cramer thinks Nvidia needs an Apple-style $500 billion stock buyback

Jim Cramer thinks Nvidia should make a bigger bet on its own shares.

The CNBC host has urged the chipmaker to launch a $500 billion stock-buyback programme, arguing that Nvidia remains “radically cheap” at roughly 23 times this year’s earnings estimates. The programme would be large enough to retire about a tenth of the company.

Nvidia has announced no such plan. It ended fiscal Q2 with about $99.3 billion remaining under its existing repurchase authorisation.

The question is whether Cramer’s Apple-style playbook makes sense when Nvidia is also spending heavily to secure future AI growth.

Cramer thinks Wall Street is still mispricing Nvidia

Cramer is making a simple case that Nvidia’s financial performance keeps accelerating, but its valuation has not expanded alongside earnings.

Fiscal second-quarter revenue reached $96.2 billion, up 106% from a year earlier, while Data Center revenue jumped 117% to $89 billion.

Cramer told CNBC that there was “no better investment for NVIDIA than NVIDIA,” arguing that the company can fund AI expansion while buying back far more stock.

TD Cowen analyst Joshua Buchalter echoes that view. MarketWatch reported that Buchalter described the shares as “materially undervalued,” noting that demand could support substantially more revenue if supply were available.

The Apple comparison matters because the iPhone maker spent years using excess cash to reduce its share count.

Cramer believes Nvidia may be reaching a similar point where repurchases become another source of returns.

Nvidia has the cash, but $500 billion is enormous

Nvidia generated $21.34 billion of free cash flow during the July quarter and returned a record $26 billion to shareholders, including $19.7 billion through share repurchases.

CFO Colette Kress said Nvidia returned about 60% of first-half free cash flow, above its 50% minimum target.

Bank of America analyst Vivek Arya thinks Nvidia could go further, as he considers consensus expectations for returning about 37% of future free cash flow too conservative.

Arya argued that lifting that ratio towards 50% to 75% “could offer real support” for Nvidia shares and compared the opportunity with Apple’s capital-return strategy.

Still, $500 billion would dwarf Nvidia’s current authorisation. It is more than five times the remaining programme and would require years of cash generation unless Nvidia dramatically altered how it deploys its balance sheet.

Buybacks would compete with Nvidia’s AI empire

The strongest argument against an enormous repurchase is that Nvidia’s balance sheet has become part of its competitive strategy.

Its supply and capacity commitments jumped from $119 billion to $279 billion in one quarter.

Those commitments are primarily tied to memory and manufacturing capacity needed to meet demand for current and future data-centre products.

Rosenblatt analyst Kevin Cassidy sees that spending as strategically valuable.

In commentary reported by Benzinga, Cassidy said Nvidia’s use of its balance sheet to guarantee supply creates a “powerful secondary competitive moat.” Rosenblatt kept a Buy rating and raised its target to $390.

That creates the capital-allocation trade-off. Money used to retire shares cannot simultaneously secure scarce memory, manufacturing capacity, infrastructure or strategic investments across Nvidia’s AI ecosystem.

Cramer’s proposal therefore rests on a bullish assumption: Nvidia will generate enough cash to do both.