Over the last couple of years, investors have listened to countless executives explain how Nvidia's (NVDA +0.87%) H100 and H200 graphics processing units (GPUs) were helping power a new wave of artificial intelligence (AI) development. Those chips, built on its Hopper architecture, have been in heavy demand.
Today, though, Nvidia is inching closer to the release of GPU using its next-generation architecture -- dubbed Blackwell. Early demand trends -- and some estimates published by investment bank Morgan Stanley -- suggest that Blackwell will rapidly become a monster seller for Nvidia. Yet as interesting as its early sales results may be, there's another metric for Nvidia that I'm more interested in seeing by year's end.
The Blackwell launch could be huge
There's been a lot of hype surrounding the Blackwell launch. Nvidia CEO Jensen Huang has said that demand for Blackwell is "insane," while CFO Colette Kress stated on the latest earnings call that the new chips should generate billions in sales by the fourth quarter.
Morgan Stanley's analysts have attempted to quantify more specifically just how much of a tailwind Blackwell sales will be for Nvidia in the near term. The analysts estimate that it will produce 450,000 Blackwell GPUs during the fourth quarter and sell them for about $22,000 apiece. Assuming that all those chips are snapped up immediately at that price, that would amount to roughly $10 billion in sales.
That would certainly be a successful launch. However, while Blackwell looks poised to help Nvidia continue shattering earnings expectations and generate record growth, I'm not going to let those forecasts distract me from another number that I think will be more important to shareholders in the long run.
Image Source: Getty Images
The other number I'm keeping an eye on
In August, in conjunction with its fiscal 2025 second-quarter earnings report, Nvidia's board of directors approved a $50 billion share buyback program. Although that authorization does not have an expiration date, I will be curious to see if Nvidia has repurchased any stock under it by the end of its fiscal year in late January. At that point, the new buyback program will have been in effect for two full quarters.
NVDA PE Ratio data by YCharts.
Although Nvidia's valuation has risen remarkably over the past year, the stock is less expensive today on both a price-to-earnings basis and a price-to-free-cash-flow basis than it was a year ago -- and by a wide margin to boot. Demand for Nvidia's GPUs is so high that the growth these products are contributing to the company's profits exceeds the pace at which the stock has risen.
So here's my question: If management believes Nvidia stock is attractively valued, will it repurchase shares before the company's Blackwell sales show up in earnings later this year and potentially send the stock price even higher?
The bottom line
By the time Nvidia releases its fiscal fourth-quarter results early next year, I will be on the lookout for the following pieces of information:
1. Has the company managed to repurchase a significant amount worth of stock under the new buyback authorization?
2. If not, have any Nvidia insiders continued to sell stock?
I think if the answer to the first question is "no" while the answer to the second question is "yes," it will be a telling signal about how management really regards the stock.
NASDAQ: NVDA
Key Data Points
Don't get me wrong -- I believe that Blackwell will provide a new tailwind for Nvidia's business and probably the stock price, too. However, if the company continues to post record profits and trades at a reasonable earnings multiple, I'd find it peculiar if insiders continue cashing out, but the company doesn't progress on the buyback program.
So, while I'm just as interested as any other investor in seeing just how much Blackwell impacts the business, I would caution investors from becoming overly enamored by the hype, and instead suggest they observe the actions of those who are most closely involved with Nvidia.
