Nvidia is working through an expanded $235 billion buyback authorization after spending $20 billion on repurchases last quarter, and CNBC's Jim Cramer says the real test is how the company executes it into the closing bell. Motley Fool data show the repurchases are easily covered by Nvidia's surging free cash flow, even as the stock trades near record highs.
Nvidia touched a fresh intraday all-time high on Friday but lost steam into the close, missing a record close, and the stock traded up over 1% Monday, pacing for a new record close. Cramer said he is watching how Nvidia trades as it begins to execute its expanded $235 billion stock buyback program.
Cramer zeroes in on the final-hour test
Cramer is focused on the final hour of trading each day, when volume picks up into the 4:00 p.m. ET close. During that stretch, zero-day options that expire the same day can contribute to outsized swings in the stock as traders adjust positions.
Nvidia, he said, "can't walk away at 3:20 and have the sellers come in." An orderly buyback, in his view, has to absorb selling pressure when it is at its greatest rather than running episodically.
Buybacks accelerate alongside cash flow
Nvidia spent $40 billion on buybacks in the first half of fiscal 2027, split evenly at $20 billion in both the first and second quarters. It recently expanded its buyback authorization by $150 billion to $235 billion, which it expects to execute through fiscal 2028.
The company covered those buybacks with free cash flow that surged 77% year over year to nearly $70 billion in the first half of fiscal 2027, and analysts expect full-year free cash flow to nearly double to $190 billion before surging another 72% to $327 billion in fiscal 2028.
A small slice of a giant market cap
The stock has rallied nearly 30% year to date and carries a market cap of $5.65 trillion, yet the full $235 billion buyback authorization equals just 4% of that market cap.
Over the past 20 years, Nvidia has reduced its share count by about 24% while its stock price surged 40,730%, and analysts expect its revenue and earnings per share to both grow at a 61% compound annual rate from fiscal 2026 through fiscal 2029.
Sources: CNBC Investing Club, The Motley Fool
Trading involves risk.
Risk Disclaimer
