Burry's Nvidia Buyback Critique: What Shareholders Need to Worry About

Michael Burry, known for his contrarian bets, argues Nvidia's $112.5 billion stock buyback program since 2018 has failed to create net shareholder value. His critique centers on the company's 47 million share count increase driven by stock-based compensation (SBC), which he claims neutralizes the purported benefits of the repurchase program. Burry contends this dynamic slashed owners' earnings by half, framing the buyback as a value-destructive accounting exercise rather than genuine capital return.

Nvidia's financials complicate this narrative. The company reported $30.04 billion in revenue-a 122% surge from the prior year-and $16.6 billion in net income, up 168%. Despite these results, shares dipped 4% post-earnings, reflecting investor unease about sustaining such growth. Nvidia doubled its authorized buyback to $50 billion in August 2024, mirroring strategies like Apple's record $110 billion plan that buoyed its shares even during sales declines.

The tension hinges on whether buybacks offset dilution or masked underlying risks. While Nvidia's $205 billion net income and $188 billion free cash flow provide a strong foundation for shareholder returns, Burry's analysis forces scrutiny of whether repurchases disproportionately favor executives and employees receiving SBC. This debate underscores a broader question: when rapid revenue growth coexists with escalating share issuance, do buybacks truly enhance value-or merely stabilize ownership structure? Investors remain divided, with some viewing Nvidia's AI-driven momentum as justification for capital deployment, while others heed Burry's warning about obscured dilution effects.

Buyback Mechanics and Dilution Dynamics

Nvidia's expanding buyback program and rising share count tell a nuanced story about capital allocation. The company doubled its authorization to $50 billion in August 2024, aiming to return value to shareholders. Yet this aggressive repurchase effort occurs alongside significant stock-based compensation dilution. Nvidia's share count has grown by 47 million units, a figure critics argue is largely offset by these buybacks rather than creating net value.

Michael Burry highlights that Nvidia's $112.5 billion in buybacks since 2018 coincided with rising shares outstanding. He contends these repurchases reduced true owners' earnings by half, despite $205 billion in net income and $188 billion in free cash flow, suggesting the program merely neutralized dilution.
Nvidia counters that buybacks target "undervalued shares during growth phase," aligning with its AI-driven expansion that drove 122% revenue growth to $30.04 billion and 168% net income gains to $16.6 billion in 2024.

Market reaction tempers optimism. Nvidia's shares fell 4% post-earnings, reflecting skepticism about sustaining such performance and the true impact of buybacks amid high expectations. While Apple's $110 billion repurchase program reportedly boosted its stock despite declining sales, Nvidia's ability to generate excess returns above dilution remains debated. Investors should note that dilution control requires buybacks to exceed new SBC issuances-a threshold not clearly met here per Burry's analysis. The core question: whether Nvidia's strategy creates net value or merely maintains share count parity during hyper-growth.

Cash Flow Allocation and Opportunity Costs

Nvidia continues to deploy its massive cash flow through buybacks rather than building its dividend. The company pays just $0.04 per share annually, translating to a 0.02% dividend yield and a 1% payout ratio according to financial analysis. This conservative approach reflects management's priority: reinvesting capital directly into artificial intelligence growth initiatives. Instead of regular shareholder payouts, Nvidia returned $24.3 billion to investors through share repurchases in the first half of 2026. This represents a significant portion of its vast cash generation capacity.

Management justified this strategy by emphasizing the need for flexibility to fund rapid expansion in AI platforms like the Blackwell architecture. The company boosted its buyback authorization by $60 billion in August 2025, demonstrating a commitment to this capital allocation method. While this approach efficiently rewards shareholders when stock prices reflect underlying value, it creates an opportunity cost. Investors forfeit predictable income streams in exchange for potential price appreciation tied directly to Nvidia's AI success.

The strategy carries inherent risks. Heavy reliance on buybacks assumes the stock is undervalued; if share prices decline further, this capital deployment becomes less efficient. Furthermore, the complete deferral of dividend increases leaves income-focused investors without compensation for holding Nvidia stock. Management acknowledges future dividend growth is possible but remains uncertain, as capital retention remains prioritized for scaling operations and sustaining aggressive buybacks amid continued revenue momentum. This model suits long-term growth investors but may not align with those seeking current income or dividend stability.

Risk-Focused Action Framework

Michael Burry's critique centers on Nvidia's buyback program effectively erasing shareholder value by offsetting internal dilution rather than enhancing equity. He argues the $112.5 billion spent on share repurchases since 2018, despite massive cash flow, actually slashed "owners' earnings" by half because the company's share count grew by 47 million shares. This suggests repurchases were largely compensating for stock-based compensation dilution instead of creating net value for remaining shareholders.

For investors managing risk exposure, this creates two key monitoring thresholds. First, track stock-based compensation (SBC) dilution trends closely. If SBC growth consistently exceeds buyback activity, it signals the repurchase program isn't protecting shareholder equity. Second, evaluate buyback efficiency using tangible metrics like earnings per share (EPS) impact versus dilution from SBC and new equity issuances. If EPS growth stalls or turns negative despite buybacks, it confirms the program isn't adding value.

The risk-driven action rule is clear: if SBC dilution accelerates faster than buyback growth, consider reducing your position. This threshold breach indicates management's capital allocation is failing to counteract dilution, aligning with Burry's claim that buybacks masked underlying value erosion. Nvidia's strong market performance and AI growth story doesn't negate this specific capital allocation risk, making disciplined monitoring essential.