Cramer demands a half-trillion buyback as NVIDIA trades at 23 times forward earnings
Against the backdrop of triple-digit revenue growth across the AI data center market, a pointed valuation argument broke into the open on Monday. NVIDIA (NASDAQ: NVDA) is trading at roughly 23 times its fiscal year 2027 earnings…
Key takeaways
- Jim Cramer called NVIDIA's valuation of roughly 23 times fiscal 2027 earnings consensus absurd given the CFO expects about 70% growth in fiscal 2028, and proposed a $500 billion share buyback.
- NVIDIA's most recent quarter produced revenue of $96.22 billion, up 105.85% year over year, with Data Center revenue of $89.02 billion growing 117% and quarterly free cash flow of $21.34 billion.
- NVIDIA had about $99 billion remaining on its repurchase authorization after returning $26 billion to shareholders in the most recent quarter, and Cramer's call would quintuple that figure.
- NVIDIA disclosed $279 billion in supply obligations and financing arrangements mobilizing more than $500 billion in third-party capital through firms including Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR, raising vendor-financing risk.
- The CUDA software moat sustains NVIDIA's pricing power because competitors AMD and Broadcom have not closed it despite credible AI accelerator roadmaps.
Against the backdrop of triple-digit revenue growth across the AI data center market, a pointed valuation argument broke into the open on Monday. NVIDIA (NASDAQ: NVDA) is trading at roughly 23 times its fiscal year 2027 earnings consensus, a multiple CNBC host Jim Cramer called absurd for a business the company's CFO expects to grow approximately 70% in fiscal 2028. Cramer's proposed remedy is a $500 billion share buyback program, roughly a tenth of the company.
The operating results do not make the case for a cautious multiple. NVIDIA's most recent quarter produced revenue of $96.22 billion, up 105.85% year over year, with Data Center revenue of $89.02 billion growing 117%. Non-GAAP gross margin came in at 75.0%, and management guided the October quarter to $108 billion, plus or minus 2%. Quarterly free cash flow reached $21.34 billion. The stock is up 16.73% year to date and 25% over the trailing year. Those gains lag the revenue trajectory by a considerable margin.
NVIDIA already held approximately $99 billion remaining on its repurchase authorization after returning $26 billion to shareholders in its most recent quarter. Cramer's call is to quintuple that figure. His argument is that the gap between the forward multiple and the growth rate signals a market pricing a demand cliff, and that management should use its cash generation to make the valuation case directly.
The vendor-financing risk embedded in the discount
The counterargument sits inside NVIDIA's own disclosures. Management has revealed $279 billion in supply obligations, alongside financing arrangements mobilizing more than $500 billion in third-party capital through Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR. Jensen Huang acknowledged that some will call this circular financing.
NVIDIA's own product roadmap clarifies why used-GPU collateral is a weak backstop. Management said the Vera Rubin architecture delivers 30 times higher throughput per megawatt and 35 times lower token costs relative to Grace Blackwell Ultra. Each new generation resets the resale value of installed silicon. A customer default would most likely arrive precisely when secondary-market prices for older GPUs are most depressed.
The competitive picture
Sector-wide, Advanced Micro Devices (NASDAQ: AMD) has a credible MI-series roadmap, and Broadcom (NASDAQ: AVGO) is building custom accelerators for hyperscalers seeking alternatives to NVIDIA's margin structure. Neither has closed the CUDA software moat, which is what sustains NVIDIA's pricing power through the current capex cycle.
On balance, the read-through is that a business generating $21.34 billion in quarterly free cash flow at a forward multiple in the low twenties is priced for a demand shock that management says it is not seeing. A buyback does not address customer-credit exposure. That exposure remains the macro caveat.
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