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• Nvidia’s announcement of a $25 billion share buyback plan caught some investors off-guard despite a strong second-quarter report and stock surge.
• The company’s shares had climbed more than 6% on the day of the announcement but ended the day relatively unchanged.
• While stock buybacks are usually seen as a positive sign, the move puzzled some given Nvidia’s rapid stock growth of around 220% in 2023.
• Investors questioned the decision considering Nvidia’s robust growth, expressing a desire to see earnings reinvested in the company.
• Some analysts suggested that the buyback might indicate that Nvidia’s management believes their stock is undervalued, although the stock’s price-to-earnings ratio contradicts this.
• The collapse of Nvidia’s deal to acquire semiconductor designer Arm Holdings Ltd last year might have limited the company’s options for deploying its resources.
• Nvidia’s buyback, despite its staggering amount, constituted only 2.1% of its market value, raising questions about the rationale behind the move.
• Other tech giants have announced even larger buybacks this year, underlining the industry’s preference for using cash for buybacks over dividends.
• Investors had mixed reactions to the buyback, with some interpreting it as a show of confidence while others questioned its timing and necessity.

Nvidia Corporation (Nasdaq: NVDA) shares initiated the trading day with a gap-up scenario, only to experience a rapid pullback following the release of economic data. The data, which still indicates a tight labor market, could potentially lead central bankers to maintain a hawkish stance, thereby exerting pressure on the US stock markets.

The stock found stability around the prior session’s closing level and is currently trading at approximately $473 in the pre-market session. This pullback might be attributed to long liquidations and profit-taking. However, the continued hype surrounding the stock could motivate traders to consider adding core long positions.

2 Weeks Ago

Assessing the stock’s fair value, it is estimated to be around $450, although the current economic landscape introduces a higher degree of uncertainty. This uncertainty has led to speculation about a possible pullback. It’s worth noting that the prior VWAP close level could serve as a supportive threshold for the stock’s price.

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