The move is a little strange given that the shares are hugely expensive now and any share buyback scheme would have been better off when the company could have picked them up cheaper.
Companies commonly repurchase their stock as a way to return capital to shareholders. Such buybacks can benefit a stock's price by reducing the supply of shares and increasing demand and can boost earnings per share.
But while shareholders often see buybacks as an encouraging sign when a company’s stock appears cheap, Nvidia’s shares have shot up some 220 per cent in 2023, leaving investors searching for the reasons behind the company’s move.
King Lip, chief strategist at Baker Avenue Wealth Management said that Nvidia’s earnings should be being plowed back into the company.
Daniel Morgan, senior portfolio manager at Synovus Trust, which owns Nvidia shares said the message seems to be that (Nvidia's) management believes that their stock is undervalued.
However, no one for a moment really believes that to be the case.