Nvidia approves buyback of shares worth $50 billion; stock drops 2% despite strong results

Nvidia's board of directors approved a $50 billion buyback of its shares while announcing its second-quarter earnings on Wednesday. The US chipmaker exceeded Wall Street estimates by a slight margin and registered a net income of $16.6 billion and a 122% rise in revenue to $30 billion.

Despite an impressive quarterly result, the company stock fell by 2% in the mark. Nvidia's after-hours share price fell as low as 6.89%, indicating investors' disappointment with the company's results.

The company's second-quarter earnings per share were 68 percent pre-share, up from 27 cents a year ago. Nvidia said it expects third-quarter revenue to grow to $32.5 billion, plus or minus 2%.

Nvidia share buyback

The computer chip giant announced a $50 billion buyback on Wednesday. The share repurchase marked a strong increase from last year, when the company announced a $25 billion share buyback as part of its fiscal second-quarter results.

Nvidia's share buyback plan is likely to please the income-minded investor as it stands as one of the biggest buybacks in the S&P 500. Earlier, Apple had repurchased around $110 billion in stock as a part of its fiscal second quarter results announced in May. The iPhone maker's share buyback plan has been the biggest in corporate history so far. Earlier, Alphabet announced a share buyback plan worth $63 billion.

Nvidia quarterly results fail to match investors' lofty expectations

Despite better-than-expected resultsand growing demand for AI chips in the market, Nvidia's quarterly results failed to impress investors who were hoping for more from the company's earnings. The investor sentiment was reflected in the Nvidia stock price, which closed 2% lower after the company results. Moreover, Nvidia's after-hours stock price declined further by 6.89%.

Experts believe that the decline in stock price due to investors' disappointment was the result of higher expectations from the company as it had beaten the market expectations with a much higher margins earlier.

“The size of the beat this time was much smaller than we've been seeing. Even future guidance was raised, but again not by the tune from previous quarters. This is a great company that is still growing revenue at 122%, but it appears the bar was just set a tad too high this earnings season," Ryan Detrick, chief market strategist at the Carson Group told Reuters.