In May 2024, Apple announced the largest stock buyback in American history…
The record lasted just over 2 years as this week Nvidia's board approved another $150 billion for buying back its own shares. That brings its total buyback budget to $235 billion.
A buyback is simple, the company uses spare cash to buy its own shares on the open market and retire them. Fewer shares exist, so each remaining share owns a bigger slice of the business.
Now whenever buybacks get mentioned I always see people moaning that the company should have just paid a bigger dividend…
But when a company pays you a dividend in a regular brokerage account, the IRS treats it as income, whether you needed the cash or not. Now when a company buys back shares, your ownership grows and you owe nothing until you choose to sell.
So with a buybacks… you control the timing.
And on a multi six or seven figure portfolio, that control is worth real money over a decade.
What’s more… Nvidia already did both. In May it raised its quarterly dividend from $0.04 to $1/share.
Then you’ve got the naysayers say Nvidia should spend the buyback money on growth instead.
But Nvidia’s lead keeps growing.
Nvidia's data center business brought in $89.0 billion last quarter… compared to its closest rival AMD which made just $6.7 billion from its data center unit.
A year earlier the gap between them was about $38 billion a quarter... now it's about $82 billion.
Does that sound like a company who has given up on growth?
Because to me… a company growing sales 106% a year while spending a sliver of its cash flow on equipment has room to reward shareholders and fund its future at the same time.
Oliver