We recently published a list of 10 Companies That Are Buying Back Their Stock in 2025. In this article, we are going to take a look at where NVIDIA Corporation (NASDAQ:NVDA) stands against the other companies that are buying back their stock in 2025.

Stock repurchases are the most discretionary form of capital allocation and have also become over time the most dominant for the US corporations. Unlike dividends, which create a recurring obligation, or capital expenditures, which are often a necessity to maintain the business operations going, buybacks offer flexibility – companies can repurchase shares when excess cash is available and halt the program during downturns or when capital allocation priorities shift. A buyback reduces the number of outstanding shares, effectively increasing earnings per share, and are therefore often seen as a form of instant gratification – prefer immediate upward pressure on stock prices over long-term gains from strategic reinvestments. Critics argue that buybacks can signal a lack of attractive reinvestment opportunities in the core business, as firms would most likely prioritize any potential project that could strengthen the competitive position and boost the growth trajectory. While such scenarios are certainly possible in some cases, proponents view stock repurchases as a natural adjustment to limited or uncertain growth opportunities or a way to return excess cash to investors in a more tax-efficient way than dividends.

Also read: 10 Technology Stocks with Insider Buying in 2024

One of the primary reasons behind stock buybacks is to support the share price during periods of economic uncertainty or market volatility. It is well known that the management possesses insider information and has much greater visibility into the business trajectory; thus, when a company perceives that its stock is undervalued and repurchases significant amount of its own stock, it can signal confidence and boost morale among the entire shareholder base. Successful investors like Warren Buffett have spoken favorably about buybacks when executed at prices below intrinsic value, emphasizing that they can be an intelligent use of capital when alternative investments offer lower returns. However, buybacks have also faced scrutiny for their potential to artificially inflate stock prices and reward executives who are compensated based on EPS growth. The debate intensifies when companies borrow money to finance these operations, which can strain balance sheets in times of economic distress and depletes the cash reserves without any claw-back option.

Recent legislative developments have placed buybacks under greater regulatory and tax scrutiny – the Inflation Reduction Act of 2022 introduced a 1% excise tax on stock repurchases, aimed at curbing excessive reliance on buybacks and encouraging reinvestment in business operations and employee wages. In short, the purpose behind these regulatory attempts was to limit the hoarding of capital into investors’ hands and stimulate reinvestments that would fuel economic growth and create jobs. Despite this, repurchase activity remains robust, with S&P 500 firms continuing to allocate substantial capital to buybacks. For reference, data published by S&P Global shows that the total dollar volume of stock repurchases during 3Q 2024 increased 22% YoY. Some investors argue that government regulations will have limited impact, as corporations may simply adjust capital allocation strategies or increase leverage to maintain shareholder returns. As the US stock market experienced a strong rally throughout 2024 and reaching new all-time highs in the second half of the year extending into 2025, studying companies that repurchase significant amounts of their own stock may offer unique insights into their business; the key question to answer though is whether these operations signal an undervalued stock price or a lack of profitable reinvestment opportunities in the near-term.

Our Methodology

For our list of companies that are buying back stock we selected the top 10 companies in the S&P 500 index with the largest dollar volume of shares repurchased during Q3 2024, as reported by the S&P Dow Jones Indices. We ranked them according to their buyback activity for the quarter and also added the number of hedge fund holders for each company in this analysis.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373% since May 2014, beating its benchmark by 208 percentage points (see more details here).

NVIDIA Corporation (NASDAQ:NVDA)

Q3 2024 buybacks: $12.68 billion

Number of Hedge Fund Holders: 223

NVIDIA Corporation (NASDAQ:NVDA) is a global leader in accelerated computing, best known for its cutting-edge GPUs that power gaming, AI, data centers, and autonomous systems. Originally dominant in gaming hardware, NVDA has expanded into high-performance computing, AI-driven applications, and enterprise solutions, with its GPUs playing a crucial role in AI model training, machine learning, and deep learning. The company’s innovations extend to industries such as autonomous vehicles, robotics, and digital twins. The California-based company ranked 2^nd on our recent list of 10 Hot AI Stocks to Buy Now.

NVIDIA Corporation (NASDAQ:NVDA) was among the best performers and highest market movers during the calendar 2024, as demand for its state-of-the-art GPUs remained exceptional throughout the year. Companies scaled their infrastructure of GPUs to support next-generation AI models training, multimodal, and agentic AI, deep learning recommender engines, generative AI inference and content creation workloads, and hence sales of H200 chips increased significantly to double-digit billions, the fastest prod ramp in NVDA’s history. Going forward, the company is focusing on three major areas: digital health, digital biology, and digital devices, with digital biology representing a $300 billion opportunity. NVDA already announced significant partnerships with IQVIA to accelerate clinical trials, Arc Institute to develop biology foundation models, Illumina for genomics advancement, and Mayo Clinic for AI-driven digital pathology. The beauty of NVDA is that it’s not a capex-intensive business, meaning that it can pursue new growth opportunities with minimal incremental cash outflows. Consequently, the only viable option to dispose of its $28 billion operating cash flow during 2024 (more than 5x the 2023 level) is to return it to investors through discretionary stock repurchases.

Overall, NVDA ranks 3rd on our list of companies that are buying back their stock in 2025. While we acknowledge the potential of NVDA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.