Investors might be penalizing Nvidia for not boosting cash returns like its Big Tech peers

Maybe it’s time for Nvidia (NVDA) and CEO Jensen Huang to up cash giveaways to lure in new investors. It wouldn’t hurt to offer an enticement.

The news: Nvidia’s large position of 8.3% of the S&P 500 (^GSPC) index and 78% active fund management ownership often acts as a headwind to the stock, BofA analyst Vivek Arya wrote in a new note. Arya pointed out that other large-cap tech names in the same position have added incremental investors by boosting cash returns and appealing to dividend and income-oriented investors.

Nvidia hasn't done this yet.

Based on Arya’s research, only 47% of Nvidia’s free cash flow from calendar years 2022 through 2025 has been allocated to dividends and stock buybacks, compared with peers that return around 80% of their free cash flow. Nvidia, instead, has plowed its cash into the AI ecosystem, investing in tech partners such as OpenAI (OPAI.PVT) and Anthropic (ANTH.PVT), which Arya believes has been “unfairly” characterized as risky circular/vendor financing.

“Boosting shareholder returns could expand ownership, close Nvidia’s valuation gap [relative to peers] and minimize circularity concerns,” Arya wrote.

AlphaSpace insights: Using Yahoo Finance’s AlphaSpace, what Arya is discussing becomes apparent when doing a comparison of Nvidia to fellow tech giant Apple (AAPL).

Nvidia has a paltry 0.01% dividend yield. Apple isn’t exactly a dividend yield hero, but its yield stands at 0.50%.

In April, Apple’s board authorized an additional $100 billion stock buyback program. This matched the $100 billion authorized in 2025 and follows their all-time record of a $110 billion program unveiled in 2024. Coming into today’s earnings release, Nvidia had $58.5 billion remaining under its stock buyback plan.

Nvidia’s forward price-to-earnings ratio is 24.9 times, while the more cash-generous Apple has a PE ratio of 32 times.

The bottom line: It would be good for Nvidia investors if management takes another look at how it’s allocating capital to shareholders. Huang has recently signaled that he is open to giving shareholders more cash, so the concern doesn’t appear to be lost on him.

There is nothing wrong with spreading cash around to the AI ecosystem, but spreading more of it to investors as growth rates come back down to earth would likely be much appreciated.

Brian Sozzi is Yahoo Finance's Executive Editor and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.

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