MW Is Nvidia spending its cash on the right things? Investors will soon get an update.
By Britney Nguyen
Nvidia pays a 'token' dividend, and while an increased payout could broaden the stock's investor base, the company has been finding other uses for its cash
Nvidia, led by CEO Jensen Huang, will report fiscal first-quarter earnings on Wednesday.
Could Nvidia start paying a more serious dividend? It's something investors want, one analyst says, but that doesn't mean they're going to get it.
Nvidia (NVDA) pays a paltry dividend, with its stock yielding just 0.02%. Technology stocks generally rank toward the bottom of the Dow Jones Industrial Average when it comes to their dividend yields: Apple shares $(AAPL)$, for example, yield 0.35%, and Amazon.com (AMZN) doesn't do payouts at all.
Yet UBS analyst Timothy Arcuri wrote recently that "many investors" he speaks with "are pushing for a much larger dividend commitment." That could make Nvidia's stock appeal to a broader investor base, in his view.
Arcuri said he could also see the chip maker upping its share-repurchase commitment to the neighborhood of $150 billion over the next 12 months. Nvidia boosted its stock-buyback program by $60 billion last August, which was a record for the company. As of its latest earnings report in February, Nvidia said it has $58.5 billion remaining under its existing authorization.
This all gets at the broader question of capital allocation. Companies with excess cash can do things like hoard it, dole much of it out through shareholder returns, make acquisitions or invest in the business through areas like research and development. Now Nvidia is showing increased interest in another option: investing in other companies within the artificial-intelligence ecosystem.
See more: As Nvidia earnings draw closer, here are 5 things investors need to watch
Arcuri said Nvidia is on track to generate about $190 billion in free cash flow this year and $320 billion next year. Its cash flow has been shifting toward AI-equity investments and away from stock buybacks, Nicholas Colas, co-founder of DataTrek Research, noted on Tuesday.
Nvidia has recently poured billions into companies in its data-center ecosystem, including inference-chip maker Groq, glassmaker Corning $(GLW)$ and neocloud CoreWeave (CRWV). While Nvidia spent 39% of its operating cash flow buying back stock in fiscal 2026, that was down from 52% in the previous year, Colas noted.
That trend "makes valuing its cash flows more complex," Colas added. The focus on investments rather than buybacks raises questions of how much return on investment Nvidia shareholders will eventually get, he said in his note.
But while Colas thinks Nvidia would "be a cleaner story" if it wasn't acting like an investor itself, "that doesn't guarantee it would be a better stock." The company's valuation seems mostly derived from investor optimism over its future growth.
"By recycling capital back into the AI ecosystem, Nvidia is hoping to help the flywheel of disruptive innovation move just a little bit faster and (ideally) in their direction," Colas said.
Nvidia has the cash to operate this way, he said, but investors will want to see it pay off, and they're due for an update on Wednesday, when the company reports earnings.
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David Wagner, head of equity at Aptus Capital Advisors, said Nvidia CEO Jensen Huang has followed the playbook of "aggressive, hyper-growth reinvestment rather than turning Nvidia into a traditional cash-cow income stock," and that's unlikely to change.
Nvidia isn't exactly sitting on its cash, Wagner told MarketWatch in emailed comments, noting that the chip maker has committed tens of billions of dollars to strategic investments and capital deployments just this year.
Rather than offering investors a taxable dividend, Wagner said Nvidia is spending on developing its hardware, securing its technology ecosystem and investing in partnerships to deploy multiple gigawatts of its chips. These deployments, he said, "should have better long-term [internal rate of return] than a small token dividend."
Meanwhile, if Nvidia does announce an increased buyback program, Wagner said, that will signal to the market that its "AI dominance is translating into spectacular liquidity."
That Nvidia is generating enough excess cash to be able to buy tens of billions of dollars of its own stock while investing billions into research and development and other areas is "a feat reserved only for elite mega-caps," Wagner said.
If Nvidia delivers revenue and earnings per share far ahead of Wall Street's expectations, as it has done in recent quarters, Brian Mulberry, chief market strategist at Zacks Investment Management, told MarketWatch he could see the company returning capital to shareholders by both raising its dividend and increasing its buyback authorization.
But Jed Ellerbroek, a portfolio manager at Argent Capital Management, said that any dividend hike would likely be "largely immaterial." From the outside, Nvidia's dividend looks like a token dividend that it's paying as some sort of requirement, he told MarketWatch.
Don't miss: Nvidia's earnings will play second fiddle to these big investor debates
-Britney Nguyen
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May 19, 2026 13:09 ET (17:09 GMT)
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