The hot trade through the end of the year and early 2027 may just be one proven market: Nvidia (NVDA).
And NVDA bulls could thank the company’s jaw-dropping new stock buyback plan for any added momentum.
The AI chip king unveiled a stunning new $150 billion stock buyback plan on Monday – the largest stock buyback authorization increase in history. This brings the company’s total repurchase authorization to $235 billion.
Nvidia shares typically gained a solid 24% in the 12 months following the announcement of a major stock buyback plan, according to data analyzed by FedWatch Advisors founder Ben Emons.
Interestingly, Nvidia’s stock buyback plans haven’t produced the best performance tracking, in part because the company’s balance sheet has high equity exposure, Emons points out.
Alphabet has the highest 12-month return of over 40%.
Stocks typically rise about 3.5% in the three-day window surrounding a major buyback announcement, according to the Emons study. Companies announcing large buybacks have historically generated returns of around 12% over four years.
Nvidia’s Huang probably sees the ideal time to buy back the company’s shares at a low price, ahead of a further acceleration in AI development.
Nvidia’s forward price-to-earnings (P/E) multiple has declined steadily since August 2024, when artificial intelligence began to take hold, sparking a boom in the company’s stock price and earnings growth.
The decline has only accelerated this year despite a series of good quarters.
Nvidia’s forward P/E ratio currently stands at 24 times, not far off from the S&P 500’s (^GSPC) 20 times multiple, despite the company being one of the fastest-growing companies in corporate America.
Brian Sozzi is the editor-in-chief of Yahoo Finance, host of the Sozzi unleashed morning show, the ‘Powerful actors with Brian Sozzi podcast and member of the Yahoo Finance editorial leadership team. Follow Sozzi on @BrianSozzi, InstagramAnd LinkedIn. Any advice on stories? Email brian.sozzi@yahoofinance.com.
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