Important points
CNBC’s Jim Cramer said Monday that Nvidia should significantly increase its share buybacks, arguing that the stock is undervalued for the company’s impressive business growth. “From an NVIDIA perspective, I don’t think there’s anything more valuable in this market than NVIDIA,” the “Mad Money” host said. To be fair, Nvidia has already ramped up share buybacks. Back in May, NVIDIA’s board approved an additional $80 billion in stock buybacks with no expiration date. This is in addition to anything left in the pre-approval. In the first two quarters of fiscal 2027, NVIDIA repurchased nearly $40 billion in stock, about the same amount as in all of fiscal 2026, according to FactSet. NVIDIA repurchased approximately $34 billion in fiscal year 2025. “We have returned 60% of our free cash flow since the beginning of the year versus our plan to return more than 50% of our free cash flow,” said Colette Kress, NVIDIA’s CFO. In last week’s financial results announcement. “And going forward, we intend to increase and return excess free cash flow, excluding strategic uses.” Cramer said that while the earnings expansion is encouraging, the company needs to move forward because of the growing disconnect between Nvidia’s fundamentals and stock performance. “I would quintuple the authorization for share buybacks. We would announce a huge $5 trillion share buyback and buy back a tenth of the company in a pretty aggressive way. Every day, like clockwork, on the bad days, we would make it even bigger,” he said. The company has repeatedly raised its outlook for future demand since its October 2025 GTC conference in Washington, D.C., and finally said last Wednesday that it expects fiscal 2028 sales to increase by about 70%, compared to expectations of about 45%. But Nvidia stock has already recouped much of its post-earnings gains, gaining just 8% since the events of Oct. 28, 2025, lagging the S&P 500’s roughly 11% gain. “No matter what Nvidia does, it’s just not being rewarded by Wall Street,” Cramer said. Part of the problem, he argued, may be Nvidia’s increasingly complex role in funding AI infrastructure construction. On Tuesday, Anthropic announced a data center agreement with Nvidia-backed cloud provider Lambda for a facility being developed by another Nvidia-backed company, Hut 8. The company has provided a financial backstop for other large AI projects by using its balance sheet to help customers finance purchases of computing infrastructure. The arrangements have fueled concerns about so-called circular financing, where companies provide financial assistance to customers who then spend money on their products. Critics worry that such deals could artificially stimulate demand, drawing comparisons to financing practices during the dot-com bubble. Cramer pushed back on those concerns, arguing that NVIDIA has an advantage over traditional financiers: its GPUs retain their value and can be redeployed if customers run into problems. “In the worst-case scenario, they will seize the GPU, possibly at the price they sold it for,” he said. Still, Cramer said Nvidia could put more capital into investments that Wall Street would find easier to value: its own stock. He pointed to Apple’s success in aggressively buying back shares over the years when management determined the stock was undervalued. These buybacks ultimately led to Apple’s stock size declining by about 40% during Tim Cook’s tenure. Stock buybacks increase the ownership rights of remaining shareholders. Apple has bought back more than $800 billion worth of its own stock during Cook’s 15 years as CEO, according to FactSet. “That’s why they should buy back huge amounts of their own stock like Apple, which was similarly misvalued,” Cramer said. Cramer’s Charitable Trust, a portfolio managed by CNBC’s investment club, owns shares in Apple and Nvidia. Subscribe to CNBC Investing Club today to follow Jim Cramer’s every move in the markets. Questions about Cramer’s disclaimer? Call Cramer: 1-800-743-CNBC Want a deeper look into Cramer’s world? Punch him! Mad Money Twitter – Jim Cramer Twitter – Facebook – Instagram Have questions, comments, or suggestions about the Mad Money website? madcap@cnbc.com
