NVIDIA Adjusts Free Cash Flow Metrics, Sustainability of $235 Billion Buyback Plan in Question

NVIDIA, after expanding its stock buyback authorization to $235 billion, emphasized returning cash to shareholders based on free cash flow after deducting "strategic uses," which may impact the cash available for buybacks and dividends. NVIDIA has not officially modified the traditional calculation formula for free cash flow. Data shows that as of July 26, for the first half of the fiscal year, NVIDIA's net cash outflow from equity investments reached $35.2 billion, with $4.5 billion in cash withheld for employee stock vesting-related taxes, and approximately $9 billion used to hedge equity dilution caused by stock incentives. If these expenditures are included in the adjustments, free cash flow would drop from the official figure of $69.9 billion to about $21.7 billion, a decrease of approximately 69%. During the same period, NVIDIA added $24.9 billion in long-term debt, partially supporting additional stock buybacks. Although Wall Street expects its free cash flow for fiscal year 2028 to exceed $330 billion, if strategic investments continue to expand, the actual cash available for shareholder returns may be significantly lower than what traditional metrics indicate. NVIDIA's investments in AI companies like OpenAI and Anthropic create a funding cycle between these investments and chip sales, raising market concerns about the sustainability of the AI investment boom.

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