Nvidia's Adjustment to Free Cash Flow Metric Draws Attention: Sustainability of $235 Billion Buyback Plan Questioned

BlockBeats news, October 10: After expanding its share buyback authorization to $235 billion, Nvidia has begun emphasizing returning cash to shareholders based on free cash flow after deducting "strategic uses," implying that external equity investments will also encroach on cash available for buybacks and dividends. However, Nvidia has not officially revised the traditional calculation formula for free cash flow.

Data shows that in the first half of the fiscal year ending July 26, Nvidia's net cash outflow from equity investments reached $35.2 billion, cash withheld for taxes related to employee stock vesting amounted to another $4.5 billion, and approximately $9 billion in buybacks were used to offset equity dilution caused by equity incentives. If these expenditures are included in adjustments, its free cash flow would drop from the official figure of $69.9 billion to approximately $21.7 billion, a shrinkage of about 69%.

During the same period, Nvidia added $24.9 billion in long-term debt, partially supporting additional share buybacks. Although Wall Street expects its free cash flow to exceed $330 billion in fiscal year 2028, if strategic investments continue to expand, the cash actually available for shareholder returns may be significantly lower than what the traditional metric indicates.

There is also a circular flow of funds between Nvidia's investments in AI companies such as OpenAI and Anthropic and its chip sales, raising market concerns about the sustainability of the AI investment boom.