When $150 Billion Looks Small
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What is the main topic discussed in this episode?
150 billion. Not that big. Botley Fool Hidden Gems Investing starts now. Welcome to Molly Fool Hidden Gems Investing. I'm your host, Tyler Crow, and today I'm joined by longtime full contributors Rachel Warren and Lou Whiteman. We are going to get into the promise and the perils of investing in the defense and security sector. We're also going to hit the mailbag, but we wanted to start the day with, I guess you could say, the biggest news story, and that was NVIDIA. They had a couple press releases today, one on AI safety, and four.
Is NVIDIA’s $150 billion buyback too small for a $5 trillion company?
For the investors, perhaps the bigger one is the board of directors announced a $150 billion share repurchase agreement. It's uh as the press release says, the biggest in history and kind of gives the the board about $250 billion to buy back shares right now. Now, guys, I I'm gonna give a hot take and I want to get your quick reactions to this. I think it's way too
I mean look, they're finally off the one cent a share dividend, which why I I didn't understand that either. But yeah, the the law of large numbers just kind of is is even that's thrown out of proportion here, but nothing is big enough. And yeah, one hundred and fifty billion, yawn.
Yeah, I mean it's the biggest in history, but it's also only around two percent of its market cap. So you sort of have to right size that for the company we're talking about. The other way to look at it is it NVIDIA is generating tremendous amounts of cash flow from the AI infrastructure build out. They have more capital than they can logistically logistically reinvest back into R and D. So I I I think that this is a a way we're seeing that play out.
I would make the argument that the announcement should be like at least triple this. I know that sounds like crazy and pr pro probably put me on like C N B C but you know, I'm not the smallest tech person. Well well look look let's put it this way. We could do a s uh C N B C take on this, but like I I would argue uh number one, between its valuation, its current like debt situation, and as we Said it's only like 2% of its market cap. There is an opportunity here for a five point, I can't even it changes $100 billion a day. So I can't even track on what the point is anymore, but five point something trillion dollar company. This should be somewhere in the, you know, at least 5% of its market cap. If you're gonna if you're trying to wow investors, don't be afraid to use a little bit of leverage.
This is a company that made $134 billion in free cash. So you added one year's worth of free cash flow. Come on, sh impress me, NVIDIA.
How is NVIDIA trying to make AI safer with new software and hardware tools?
So I I'm I'm being a little hot take here, but the part of the reason I think that they announced this, and I want to get your guys' take on this one specifically was in addition to this share repurchase, there was a press release related to, you know, it's AI safety and perhaps building some guardrails or some safe spaces where we don't get these. Hey AI. AI may have hacked Hugging Face. Hey, AI may have hacked the Australian government's health websites. All these uh news stories we've been popping up. It was maybe this one hundred and fifty billion dollars, a little bit of, hey, let's help the medicine go down here for our investors.
Yeah, I think that's definitely part of it. I I don't think the timing is a mistake by any means. I think that was probably very well coordinated from up above. But this is a real industry issue. You know, we're seeing advanced AI models, as you noted, um, from a wide range of of labs as well as the big hyperscalers that are repeatedly breaching secure sandboxes. Obviously, there's the high profile hugging face incident, but we're also at a time where CEO Junston Huang has been very, very clear on the approach he wants to take here. He doesn't want to wait for government regulation. He's actually pushed back against that. He's really framed AI safety strictly as an engineering problem that can be managed at the hardware and platform layer.
And so, just to talk a little bit about what they're doing, NVIDIA is introducing an open source framework.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:02–0:35
2
Is NVIDIA’s $150 billion buyback too small for a $5 trillion company?
0:35–2:32
3
How is NVIDIA trying to make AI safer with new software and hardware tools?
2:32–4:20
4
What risks could slow NVIDIA’s AI chip growth and disappoint investors?
4:20–9:13
5
Why are new defense and security companies attracting investor attention?
9:13–10:46
6
What should investors look for when evaluating defense startups and SPACs?
10:46–14:24
7
Could defense tech companies like Anduril and Shield AI go public soon?
14:24–17:40
8
Why did Klarna stock fall after reporting strong earnings?
17:40–21:48