NVIDIA is amassing cash at a speed unseen in the history of technology, with free cash flow for the current fiscal year projected to reach $96.5 billion, far exceeding $3.8 billion from two years ago. In response to the substantial capital, the company adopts a unique allocation strategy: rewarding shareholders through stock buybacks while investing in client companies such as Anthropic to strengthen the AI chip ecosystem. This capital deployment approach, focused on its core ecosystem, is prompting the market to reassess its long-term influence.
$NVIDIA (NVDA.US)$ is accumulating cash at a speed never before seen in the history of the technology industry, with its explosive growth in free cash flow propelling the company to new heights of wealth accumulation.
As massive profits from the artificial intelligence boom continue to pour in, this chip giant is facing a happy yet challenging strategic test: how to effectively allocate its rapidly expanding pool of capital.
Benefiting from the soaring sales of AI-dedicated chips, NVIDIA's free cash flow for the fiscal year ending January next year is projected to reach $96.5 billion, compared to just $3.8 billion two years ago. Analysts expect that over the four-year period leading up to January 2030, the company’s total cash generation after deducting capital expenditures will amount to $850 billion. This scale indicates a significant shift in wealth distribution within the tech industry, flowing from various tech giants investing in AI infrastructure to NVIDIA as a core upstream supplier.
Facing the surge in liquidity, NVIDIA CEO Jensen Huang stated that the company will continue to push forward with stock buybacks and use funds to finance growth and expand its ecosystem. Currently, the cash reserves on NVIDIA's balance sheet have climbed from approximately $13 billion at the beginning of 2023 to $60 billion by the end of October this year. Meanwhile, NVIDIA is attempting to solidify its market demand through customer investments and more sophisticated financial strategies, which are drawing close market attention to its capital deployment logic.
While competitors like Google and Meta have traditionally opted to consume cash through diversified investments, NVIDIA appears to be more inclined to reinvest its capital into its own AI chip ecosystem. This unprecedented ability to generate cash, coupled with a highly focused spending model, is prompting investors to reassess the company’s long-term capital return trajectory and potential market influence.
An Epic Surge in Cash Flow
NVIDIA’s cash-generating capability is undergoing a qualitative leap. Data shows that in the year ended January 2023, NVIDIA’s free cash flow was only $3.8 billion, but with the takeoff of AI chip sales, this figure is expected to skyrocket to $96.5 billion for the fiscal year ending January next year. This revenue growth represents a compound annual growth rate of 194%.
During the same period, NVIDIA is expected to generate a total free cash flow significantly exceeding $Alphabet-C (GOOG.US)$ 、 $Meta Platforms (META.US)$ 、 $Amazon (AMZN.US)$ and $Microsoft (MSFT.US)$ The anticipated level. Looking back at the financial history of large technology companies since 1990, the only comparable period was $Apple (AAPL.US)$ the surge that occurred in the years following Apple's launch of the iPod in 2001.
These four technology giants are currently significantly increasing their capital expenditures to build AI infrastructure, a move that is putting downward pressure on their own free cash flow while essentially creating a massive transfer of wealth within the industry—vast sums of money are flowing from these major clients to NVIDIA.
Moreover, NVIDIA’s projected total cash flow also surpasses that of Apple. Unlike the aforementioned four companies, Apple has been relatively restrained in its investment in AI and has historically maintained low overall capital expenditure, making NVIDIA’s surpassing of Apple in cash generation capacity all the more symbolic.
Looking ahead, this growth trend shows no signs of slowing down. The company's report released last week showed a 62% increase in revenue for the October quarter. According to S&P Global Market Intelligence, analysts expect NVIDIA to generate approximately $850 billion in cash over the four years ending January 2030 after deducting capital expenditures. Even if the actual amount were to be halved, it would still represent a significant leap from the $21 billion total generated by the company between fiscal years 2020 and 2023.
Building Ecosystems and Reverse Investments
Suddenly awash with cash, the market has turned its focus to where NVIDIA’s funds are being directed. The company announced a series of investment plans targeting firms that use its chips, including a planned $10 billion investment in Anthropic and a $100 billion investment in OpenAI. These moves have raised questions: Is NVIDIA attempting to artificially boost demand for its chips by funding its customers?
In addition to direct capital injections, NVIDIA has also invested in $CoreWeave (CRWV.US)$ emerging cloud service companies that purchase its chips. In some cases, NVIDIA has adopted more aggressive financial measures. The company stated this week that it had guaranteed the lease of a data center for an unnamed cloud company in exchange for stock warrants. Such guarantees help reduce loan risks, thereby lowering the financing costs for the data center.
Jensen Huang responded during the earnings call that investing in companies like OpenAI aims to expand “our ecosystem” and leverage cash to fund growth. This indicates that NVIDIA is taking a different growth path compared to Meta and Google: While the latter typically diversify their cash into other businesses (such as virtual reality or autonomous vehicles), NVIDIA has chosen to double down on its core business ecosystem.
Stock Buybacks and Cash Reserves
In addition to external investments, returning value to shareholders remains a key component of NVIDIA's capital allocation strategy. In the first three quarters of the current fiscal year, NVIDIA’s stock repurchase expenditures have increased from USD 10 billion in the fiscal year 2023 to USD 36 billion. Jensen Huang confirmed that the company will “continue to execute stock repurchases.”
Despite the substantial spending plans, NVIDIA’s cash position on its balance sheet continues to grow steadily as some high-profile investments remain incomplete — for instance, OpenAI and NVIDIA are still negotiating the final terms. Cash holdings have surged from approximately USD 13 billion at the beginning of 2023 to USD 60 billion by the end of October. This expanding figure not only underscores the company’s financial strength but also leaves significant room for imagination regarding its future capital allocation strategies.
Editor /rice