Cramer Says Nvidia at 23 Times Earnings Needs a Half Trillion Dollar Buyback

Jim Cramer took to CNBC to argue that NVIDIA is overvalued at a 23x forward earnings multiple, despite the company's rapid growth. He suggested that NVIDIA should undertake a $500 billion share repurchase, roughly a tenth of the company's market cap. Cramer pointed to a valuation gap he believes is indefensible, given NVIDIA's massive order book and profitability.

The CFO has stated that the company will grow by approximately 70% in fiscal 2028. NVIDIA reported $96.22 billion in revenue for the latest quarter, up 105.85% year-over-year, with Data Center revenue growing 117%. The trailing multiple is 44x, but the forward multiple Cramer quoted appears closer to the actual growth. However, other companies like AMD and Broadcom are developing custom accelerators for hyperscalers seeking NVIDIA alternatives, yet neither has eliminated the CUDA software moat.

NVIDIA generates $21 billion in free cash flow quarterly at a forward multiple in the low twenties. Cramer's defense of NVIDIA's role as the AI industry's banker is undermined by the company's reliance on circular financing, customer concentration, and a supply book increasingly financed by NVIDIA's own resources. While a buyback can help support EPS, it does not address the underlying demand risk or reduce vendor-financing exposure.