Nvidia Cash Geyser Can Cover Buybacks and Vital R&D

tech.hindustantimes.com:

Investors fretting that Nvidia Corp.'s massive stock buyback allocation would leave it short of funds for vital research and development should take heart from the chipmaker's swelling free cash flow.

Nvidia is generating so much cash from the artificial intelligence boom that it has more than enough to invest in new chips and return money to shareholders. Free cash flow and spending on research and development both hit records in Nvidia's fiscal second quarter and the company still had about $1 billion left after spending $3 billion on buybacks.

When technology companies start setting aside increasing amounts for share repurchases and dividends, some investors take it as a sign management sees fewer opportunities worth investing in and that growth is poised to slow. When Nvidia said last month it was earmarking $25 billion for stock repurchases, some expressed that worry. That sum — which Nvidia isn't obligated to deploy — represents more than five times the profit Nvidia generated in its last fiscal year.

For others, that was missing the point. The company's leadership in components that underpin the infrastructure being put in place for artificial intelligence systems is set to generate so much free cash that it can still afford to invest to keep its technological lead and reward shareholders.

“It was kind of like their attempt to show the market something else: We want to show how financially strong we are, we're going to flex a bit,” said Chris Mack, an analyst and fund manager at Harding Loevner, which owns Nvidia shares as part of the $55 billion assets it has under management. “They're generating a ton of cash and will continue to do that.”

Another concern is that Nvidia could be buying at overinflated prices after