when Nvidia This week, the company announced it would acquire a $2 billion stake in chip design company Synopsys, just the latest in a series of big investments the company announced this year.
Nvidia also announced that it would acquire a $1 billion stake in Nokia and invest $5 billion. intel And $10 billion for Anthropic — the total commitment from those four deals is $18 billion, not including small venture capital investments.
That doesn’t even include its biggest commitment in years to buy OpenAI stock for $100 billion, but no final deal has been reached yet, NVIDIA finance chief Colette Kress said Tuesday.
That’s a lot of money and a lot of deals, but Nvidia has the cash to write the big checks.
At the end of October, NVIDIA had $60.6 billion in cash and short-term investments. This is 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 technology product.
As Nvidia transforms from a maker of gaming technology to America’s most valuable 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 to the scale that we’re talking about,” CEO Jensen Huang said during Nvidia’s earnings call last month, when asked what the company plans to do with all its cash.
Analysts surveyed by FactSet expect the company to generate $96.85 billion in free cash flow this year alone, and $576 billion over the next three years.
Some analysts want Nvidia to spend more cash on stock buybacks.
“NVIDIA is on track to generate more than $600 billion in free cash flow over the next few years, which should leave plenty of cash left for opportunistic share buybacks,” Melius Research analyst Ben Reitz wrote in a note Monday.
The company’s board increased its share buyback authorization in August, adding $60 billion to the total. In the first three quarters of this year, the company spent $37 billion on stock buybacks and dividends.
“We will continue to buy back our own shares,” Huang said.
Nvidia is buying back its own stock, but it’s not stopping there.
Huang said the strength of NVIDIA’s balance sheet gives customers and suppliers confidence that future orders (called offtake) will be fulfilled.
“Our reputation and credibility are incredible,” Huang said. “To do that, you need a very strong balance sheet to support the level of growth and the rate of growth and the scale that goes with it.”
Kress, Nvidia’s chief financial officer, said Tuesday that the company’s “biggest focus” is ensuring it has enough cash to deliver its next-generation products on time. Most of Nvidia’s largest suppliers are equipment manufacturers, such as Foxconn and Dell, which may require Nvidia to provide working capital to manage inventory and build additional manufacturing capacity.
Huang called his company’s strategic investments “really important work” and said the growth of companies like OpenAI will drive further consumption of AI and NVIDIA chips. Nvidia states that no investment is required to use their product, but it is required anyway.
“Every investment we’ve made so far, and I mean everything, is related to expanding the scope of Cuda, expanding the ecosystem,” Huang said, referring to the company’s AI software.
Nvidia said in an October filing that it had already invested $8.2 billion in private companies. For Nvidia, these investments replaced acquisitions.
Nvidia’s $7 billion acquisition of Mellanox in 2020 was the company’s largest ever, and it laid the foundation for its current AI products. This is not a single chip, but an entire server rack that will sell for an estimated $3 million.
However, the company faced regulatory issues when trying to acquire chip technology companies. arm 40 billion dollars in 2020.
Nvidia called off the deal before it was finalized after U.S. and British regulators raised concerns about the impact on competition in the chip industry. Nvidia has acquired several smaller companies in recent years to strengthen its engineering team, but it hasn’t completed a multibillion-dollar acquisition since the Arm deal fell through.
“It’s hard to think about very significant, large-scale M&A,” Kress said at an investor conference this week. “I wish it were available, but it’s not easy to do so.”
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