With a market capitalization around $4.1 trillion (as of March 27), Nvidia (NASDAQ: NVDA) is by far the world’s most valuable company. It’s worth $420 billion more than Apple. That difference is roughly equal to the market cap of Chevron.
These are massive numbers we’re talking about. It’s all the direct result of Nvidia shares surging 1,200% in the past five years. The business deservedly gets a lot of praise for its dominant position at the center of the artificial intelligence (AI) boom.
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However, investors should still pay attention to the management team’s capital allocation moves. Did Nvidia make a $40 billion mistake in fiscal 2026 (ended Jan. 25)?
Nvidia spent just over $40 billion on share buybacks in fiscal 2026. This is not an insignificant sum of money. It’s equal to 33% of the company’s $120 billion in net income, and it’s nearly seven times higher than the $6.1 billion that Nvidia spent on capital expenditures (capex) last fiscal year.
At first glance, the critics might have a valid point. They might argue that some or all of this $40 billion is better off being spent on research and development (R&D) efforts or hardware and software capabilities. Businesses usually prioritize reinvesting in their own operations if they see opportunities that can strengthen their competitive positions. Given the tremendous growth that the company has been registering, investors might wonder why Nvidia doesn’t allocate that money to further benefit from the ongoing AI boom.
“We look at our capital return, very, very carefully,” CFO Colette M. Kress said on the fourth-quarter 2026 earnings call. “And we do believe that one of the most important things that we can do is really supporting the extreme ecosystem that’s in front of us.” The leadership team believes that its capital is going to the right places.
Nvidia already has a robust innovation pipeline. Its powerful graphics processing units, CUDA platform, and push into physical AI demonstrate this. Nvidia also acquires equity stakes in other AI companies. The most notable targets include CoreWeave, OpenAI, and Nebius.
Nvidia’s ultimate fate is tied to AI. There’s no getting around this reality. If AI doesn’t live up to the hype, and spending on related infrastructure cools down, this company’s financials will surely take a hit.
