Does Nvidia’s Big Buybacks Raise Concerns About Future Growth?

Some analysts are concerned that Nvidia’s (NVDA) massive stock repurchases could leave it short of cash for vital research and development (R&D).  However, those concerns may be misguided as Nvidia’s free cash flow and spending on research and development both rose to records in Nvidia’s fiscal second quarter, and the company still had about $1 billion left after spending $3 billion on stock buybacks. 

There are concerns that when technology companies start boosting their amounts for share repurchases and dividends, it is a sign that management sees fewer opportunities worth investing in and that growth is poised to slow.  Last month, Nvidia said it would use $25 billion for stock repurchases, representing more than five times the profits the company generated in its last fiscal year.