Nvidia’s share buyback shows the chipmaker’s stock is too cheap for Mr. Huang to resist.

Nvidia CEO Jensen Huang puts his company’s money where his mouth is.

When the semiconductor maker announced a record share buyback on Monday, its stock price was at its lowest level in a decade, according to one key metric. “Repurchasing Nvidia stock is a huge opportunity,” Huang told CNBC’s Jim Cramer last month.

Nvidia’s price-to-earnings ratio for fiscal 2028, which begins in February, is just 14.5 times, lower than other mega-cap peers. micron. The average current P/E ratio over the past five years is 62.9x, which is more than double the current price.

This steep multiple for the world’s most valuable company, currently worth more than $5.5 trillion, reflects the chipmaker’s sustained historic revenue growth rate, which is driving the artificial intelligence boom. The company’s stock has risen 23% since the beginning of the year, outperforming the Nasdaq market, but has not kept pace with expected profit growth.

Analysts, on average, expect NVIDIA’s net income to reach nearly $385 billion in fiscal 2028, an increase of 60% year-over-year and more than a five-fold increase over three years.

So on Monday, Nvidia announced it had authorized an additional $150 billion for its stock repurchase program. This comes on top of an $80 billion share buyback plan announced in May, and the company increased its quarterly cash dividend from 1 cent to 25 cents per share.

Karan Ramchandani, a managing director at Post Oak Group, said in an interview that the buyback sends a “clear message” that management believes its stock is undervalued.

“If you look at the P/E ratio, earnings are growing faster than the stock price,” Ramchandani said. “This is a very healthy sign that companies are considering share buybacks as the best investment they can make next year.”

Shares rose nearly 2% on Monday, when the company also announced new software and hardware solutions to control its AI agents.

NVIDIA is ramping up its capital return plan as revenue and cash flow explode due to demand for the company’s graphics processing units used to build and run AI models and services.

The company has signaled continued growth through early 2028, telling investors in August that it expects revenue to increase 70% in fiscal 2028, implying that NVIDIA will achieve hundreds of billions of dollars more in revenue than Wall Street had previously predicted.

Huang told investors at a Goldman Sachs conference earlier this month that Nvidia was “misunderstood,” implying that it should be valued more highly on both its growth potential and its value as measured by future earnings.

“We are the world’s first and only growth value stock,” Huang said. “People are trying to figure out which one we are. We’re both.”

Nvidia previously said it planned to return about half of its free cash flow to investors through share buybacks and buybacks. If the chipmaker uses up all its current approvals, its share number could fall by 4%.

“It’s going to generate a lot of cash over the next few years,” Huang told CNBC’s “Squawk Box” on Monday. “Once we generate more cash, we want to be able to return it to shareholders.”

Gene Munster, managing partner at Deepwater Asset Management, told CNBC’s “Fast Money” on Monday that investors appear concerned that growth rates will slow after a phenomenal few years.

“It’s very difficult for investors to feel comfortable if this situation continues,” Munster said. “The downslope in growth is why it trades at compressed multiples.”

Nvidia’s FY2028 P/E ratio is lagging behind apple (35.5), alphabet (22.6), microsoft (21.7) and Amazon (23.2) Measured over a similar period. It also has a lower rating compared to competing products of major AI data center chips. broadcom (18.2), advanced micro device (38.2) and intel (54.7). None of Nvidia’s competitors are predicting 70% revenue growth next year.

Broadcom’s silicon business is built around developing custom chips with companies like OpenAI and Google. AMD competes with Nvidia in GPUs, but only has a fraction of the market share. Intel makes central processors and dabbles in AI chips, but it doesn’t have anything comparable to Nvidia’s GPUs.

Melius Research analyst Ben Reitz recommends the stock a buy, calling the stock “deserving of upside given its growth rate.”

“Buying back stock in an increasingly large way would really help solve that problem and get a better valuation,” Reitzes said on CNBC’s “Closing Bell” on Monday.

UBS analysts said in a note Monday that Nvidia’s increased share buybacks could add 8 cents per share to the company’s calendar 2027 earnings, estimated at $17.16.

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