When Nvidia this week said it would take a $2 billion stake in chip design company Synopsys, it was just the latest in a string of massive investments announced by the chipmaker this year.
Nvidia has also said it would take a $1 billion stake in Nokia, invest $5 billion in Intel and $10 billion in Anthropic — $18 billion in investment commitments from those four deals, not counting smaller venture capital investments.
That doesn’t even include the biggest commitment of all: $100 billion to buy OpenAI shares over a number of years, although there is still no definitive agreement, Nvidia finance chief Colette Kress said Tuesday.
It’s a lot of money and a lot of deals, but Nvidia’s got the cash to write big checks.
At the end of October, Nvidia had $60.6 billion in cash and short-term investments. That’s up from $13.3 billion in January 2023, just after OpenAI released ChatGPT. That launch three years ago was key to making Nvidia’s chips the most valuable tech product.
As Nvidia has transformed from a maker of gaming technology into the most valuable U.S. company, its balance sheet has become a fortress, and investors are increasingly wondering what the company will do with its cash.
“No company has grown at the scale that we’re talking about,” said CEO Jensen Huang, when asked what the company plans to do with all its cash, on Nvidia’s earnings call last month.
Analysts polled by FactSet expect the company to generate $96.85 billion in free cash flow this year alone and $576 billion in free cash flow over the next three years.
Some analysts would like to see Nvidia spend more of its cash on share repurchases.
“Nvidia is set to generate over $600B in free cash flow over the next few years and it should have a lot left over for opportunistic buybacks,” wrote Melius Research analyst Ben Reitzes in a note on Monday.
The company’s board increased its share repurchase authorization in August, adding $60 billion to its total. In the first three quarters of the year, it spent $37 billion on share repurchases and dividends.
“We’re going to continue to do stock buybacks,” Huang said.
Nvidia is doing the buybacks, but it’s not stopping there.
Huang said that Nvidia’s balance sheet strength gives its customers and suppliers confidence that orders in the future, which he called offtake, will be filled.
“Our reputation and our credibility is incredible,” Huang said. “It takes a really strong balance sheet to do that, to support the level of growth and the rate of growth and the magnitude associated with that.”
Kress, Nvidia’s CFO, on Tuesday said that the company’s “largest focus” is making sure it has enough cash to deliver its next-generation products on time. Most of Nvidia’s largest suppliers are equipment manufacturers like Foxconn and Dell, which can require that Nvidia provide working capital to manage inventory and build additional manufacturing capacity.
Huang called his company’s strategic investments “really important work” and said that if companies like OpenAI grow, it drives additional consumption of AI and Nvidia’s chips. Nvidia has said that it does not require any of its investments to use its products, but they all do anyway.
“All of the investments that we’ve done so far — all of it, period — is associated with expanding the reach of Cuda, expanding the ecosystem,” Huang said, referring to the company’s AI software.
In an October filing, Nvidia said it had has already made $8.2 billion in investments in private companies. For Nvidia, those investments have replaced acquisitions.
Nvidia’s $7 billion acquisition of Mellanox in 2020 is the largest the company has ever made, and it laid the groundwork for its current AI products, which aren’t single chips but entire server racks that sell for around an estimated $3 million.
But the company faced regulatory issues when it tried to buy chip technology firm Arm for $40 billion in 2020.
Nvidia called off the deal before it could be completed after regulators in the U.S. and UK raised concerns about its effects on competition in the chip industry. Nvidia has purchased some smaller companies in recent years, to bolster its engineering teams, but it hasn’t completed a multi-billion acquisition since the Arm deal failed.
“It’s hard to think about very significant, large types of M&A,” Kress this week said, speaking at an investor conference. “I wish one would come available, but it’s not going to be very easy to do so.”
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