Poor Nvidia Corporation has too much cash and not enough places to put it.
The Californian semiconductor titan flew past Wall Street expectations to deliver blockbuster revenues of $13.51 billion in the second quarter, thanks mainly to Nvidia’s artificial intelligence-focused A100 and H100 chips.
Third-quarter revenue forecasts, therefore, were upgraded from $12.6 billion to $16 billion.
This has resulted in a problem prevalent among Big Tech: Nvidia’s balance sheet is stuffed to the gills with dollar bills, even after giving back $3.38 billion to shareholders in the second quarter through buybacks.
Nvidia’s solution? The board approved an additional $25 billion in share repurchase programme, without expiration, starting from now.
Nvidia was hardly under pressure to return even more value to shareholders; stock is already up more than threefold year to date, or nearly sevenfold in the past five years.
This suggests that Nvidia chief Jensen Huang sees no prospect of a major acquisition in the near future.
For the record, $25 billion worth of buybacks is two-thirds the price of Huang’s bid to buy British semiconductor architect Arm Holdings for $40 billion.
That bid was nixed by regulators in the end, with Arm’s parent SoftBank poised to IPO the firm on Nasdaq in the coming months.
Evidently, given these handsome buybacks, there are no other M&A prospects outside of Arm for Nvidia in the near future.
Despite being an eye-watering sum, Nvidia’s buyback programme barely stacks up to other blue-chip programmes announced this year, such as:
- Apple Inc (NASDAQ:AAPL)’s $90 billion buyback programme
- Google (NASDAQ:GOOGL) parent Alphabet’s $70 billion buyback programme and
- Chevron’s $75 billion buyback programme
In the UK, share buybacks have become a source of controversy due to their popularity in energy sector, where customers have felt the inflationary pinch.
UK banking giants have also gone large on buybacks this year, despite being accused of insufficiently passing net interest margins down to struggling customers.
Oil supermajor Shell (LON:RDSa) PLC (LSE:SHEL, NYSE:SHEL) promised $5.5 billion of new share buybacks and increased its quarterly dividend 15% to $0.33 in July, while HSBC Holdings PLC (LSE:LON:HSBA) announced a new US$2bn share buyback programme in August.