Investor Michael Burry, known for his correct bet against the housing market, has questioned Nvidia Corp.’s (NASDAQ:NVDA) capital allocation strategy. He says the company spent $112.5 billion on stock buybacks since 2018 but gained “zero” additional shareholder value.
Burry analyzed Nvidia’s financial data and found a disconnect between its aggressive share repurchases and rising share count. The company spent $20.5 billion on stock-based compensation (SBC) since 2018, while reporting robust net income and free cash flow of $205 billion and $188 billion, respectively.
However, Burry argues that the buybacks primarily offset SBC-related dilution, rather than reducing outstanding shares. He claims this distorts the “owner’s earnings” perspective, making it less favorable for long-term investors.
This criticism comes as Nvidia continues to dominate its market and soar in stock price, fueled by its role in the AI revolution. The company recently reported record revenue of $57 billion, with CEO Jensen Huang saying “AI is going everywhere.”
Despite this success, Burry’s critique highlights a potential issue with Nvidia’s capital allocation strategy. His analysis suggests that the company’s efforts to reduce dilution through buybacks may be more effective than initially thought.
Source: https://www.benzinga.com/markets/equities/25/11/48969280/michael-burry-says-nvidia-spent-112-5-billion-on-buybacks-adding-zero-shareholder-value-the-true-cost