Nvidia’s Latest $150 Billion Move Delivers a Clear Message to Investors About What’s Next for the Stock.

Key Points

• Nvidia’s stock climbed in the triple digits in recent years, thanks to the company’s leadership in the AI chip market.
• The shares lost some momentum this year amid various headwinds, leaving investors wondering about their growth potential.
• 10 stocks we like better than Nvidia ›

Nvidia (NASDAQ:NVDA) has delivered many victories to investors in recent years. The company built a position as artificial intelligence (AI) chip leader, then added on a broad range of related products and services. All of this supercharged revenue and the stock performance as the AI boom strengthened and demand for compute soared. Over the past five years, Nvidia's annual revenue and the stock price have climbed more than 700% and 800%, respectively.

This year, earnings have continued to march higher, but the stock, delivering a gain of more than 20% so far, hasn't maintained the momentum we've seen in recent years. General economic worries, such as rising inflation, and concerns about the rapid pace of the AI infrastructure build-out have weighed on demand for this growth stock. And some investors simply shifted out of Nvidia, locking in profits, in favor of other AI stocks that hadn't climbed as much.

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As a result, Nvidia's gains haven't been as spectacular as in the past, and the stock's valuation has declined to bargain levels. Now you may be wondering what's next for shares of the AI giant... Nvidia's latest $150 billion move delivers a clear message to investors.

Image source: The Motley Fool.

Nvidia's role in the AI market

First, though, let's take a quick look at Nvidia's role in the AI market. Nvidia makes the world's fastest graphics processing units (GPUs), the chips used for crucial AI tasks such as the training of models and the thinking process they go through to solve problems. The company entered the market early and updates its GPUs on an annual basis, a recipe that has kept it ahead of rivals. On top of this, Nvidia has expanded into enterprise software, networking tools, and more, making it the key source to turn to for anything AI.

But as mentioned, a variety of concerns have weighed on the stock's performance this year, slowing the momentum investors had grown accustomed to seeing in recent years. As Nvidia's earnings continued to climb, its stock price made more moderate gains. And as a result, the company's valuation has dropped. Today, Nvidia trades for about 24x forward earnings estimates, a level that looks dirt cheap considering the company's leadership in the AI market, competitive advantage, and its long-term AI prospects.

It's important to remember that AI is just starting to be used in the real world, suggesting a lot of growth likely lies ahead. Analysts expect the AI market to reach beyond $1 trillion in the early part of the next decade, offering Nvidia a huge growth opportunity.

Nvidia announces the biggest share repurchase increase ever

Now, let's consider the billion-dollar move Nvidia just made. The AI powerhouse said its board of directors authorized a $150 billion increase to the company's share repurchase program, taking the total program to $235 billion. This is the biggest share repurchase increase ever.

The company will execute this plan through the next fiscal year, which begins in late January of 2027 and will be Nvidia's 2028 fiscal year.

Now here's the message to investors, and it comes in the form of words from Nvidia chief Jensen Huang.

"This authorization reflects our confidence in the long-term opportunity ahead," he said in a statement.

Clearly, Huang and Nvidia's board of directors expect Nvidia's growth in the coming quarters and years to drive the stock considerably higher -- and they're eager to buy back shares at the current price.

What does this mean for investors?

So, what does this mean for you as a shareholder or a potential Nvidia investor? Huang has expressed confidence in Nvidia's prospects in recent quarters, citing much need for AI compute moving forward. He's also expanded Nvidia's presence throughout the AI ecosystem, with the latest move being the release of a platform to ensure that AI agents operate safely. This maintains Nvidia as the central player in the AI story, something that further reinforces the company's moat, or competitive advantage.

Now, this buyback move shows Nvidia putting its money where its mouth is, setting the stage to scoop up shares as soon as possible in order to benefit from potential gains to follow. And that commitment offers investors a reason to be optimistic about the AI giant too.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.