Nvidia Just Authorized a $150 Billion Buyback

Nvidia has authorised another US$150 billion to buy back its own shares, but that doesn’t guarantee investors a profit.

The announcement brings the amount Nvidia still has permission to spend on share buybacks to US$245 billion.

The company expects to carry out the buyback programme through 2028 and says it generates enough cash to invest in the business while returning money to shareholders.

Here’s how a buyback works.

A company purchases its own shares. If that reduces the number of shares available, each remaining share represents a larger percentage of the business.

The profit attributed to each share can also increase without the company’s total profit increasing.

Imagine a company earns $100 and has a hundred shares. That’s one dollar of profit per share. Reduce the share count to eighty, with profit unchanged, and profit per share becomes one $1.25.

But buying back shares uses cash, so the price the company pays matters.

A buyback can benefit shareholders when the company gets good value for the shares it purchases. Paying too much can waste money.

Buybacks can also offset new shares issued to employees, so watch whether the total number of shares actually falls.

And getting permission to spend doesn’t mean all those purchases have already happened.

For investors following the AI boom, this is a significant announcement. But you still need to assess the company’s profits, competition, demand for its products and whether its stock price makes sense.

If you invest from Jamaica, broker fees and exchange-rate movements also affect how much money you make or lose.

And that’s the bottom line.

Would you rather a company buy back shares or pay you a bigger dividend?