Nvidia's (NASDAQ: NVDA) Board of Directors authorized a $150 billon increase to its share repurchase program, bringing the total to $235 billion. The announcement was the largest single stock buyback authorization in U.S. corporate history.

For context, Toyota Motor -- which sells more cars than any other manufacturer in the world -- has a market cap of $223 billion.

Here's why Nvidia's buyback program is great news for investors, and why the bigger story is what Nvidia is doing with the rest of its cash.

Image source: Nvidia.

High margin revenue growth fuels free cash flow

Nvidia's free cash flow (FCF) has exploded in recent years due to its rapid revenue growth and high margins. Nvidia returned 60% of FCF to investors through buybacks and dividends in the first half of fiscal 2027, and has a long-term target of returning at least 50% of FCF.

NVDA Revenue (TTM) data by YCharts

Nvidia is converting around 75 cents of every dollar in sales into gross profit, 64 cents into bottom-line after-tax profit, and around 42 cents into FCF. Nvidia's growth and high margins are partly due to insatiable demand for artificial intelligence (AI) compute -- which is benefiting the broader semiconductor industry. But Nvidia also has a highly effective product development pipeline that has produced three new compute platforms in four years. These aren't marginal improvements either.

Its Grace Blackwell platform, announced in March 2024, was magnitudes better than Hopper, launched in March 2022. In January 2026, Nvidia announced its Vera Rubin platform. Compared to Blackwell, Rubin delivers a 90% reduction in inference costs and a 75% reduction in the number of graphics processing units (GPUs) needed for training.

Nvidia has been the poster child of the AI boom since OpenAI released ChatGPT to the public in November 2022. But it's what the company has developed since that should be getting more attention.

Nvidia began shipping Rubin in August and already expects it to account for 20% of data center revenue in the third quarter of fiscal 2027, which it will report in November. Demand for Rubin is so massive that Nvidia is guiding for 70% year-over-year revenue growth in fiscal 2028. Higher memory chip costs have yet to make a substantial dent in Nvidia's gross margins -- a testament to its pricing power.

Rubin's efficiency is not solely due to Nvidia's making a more powerful GPU. It's also because Rubin comes in a rack-scale offering that includes multiple chips and networking components, which Nvidia calls extreme co-design. This co-design allows Nvidia to control a larger share of the data center addressable market, and in turn, offers significant performance improvements for its customers that justify the high price tag. The Nvidia NVL72 is a plug-and-play offering for AI data centers that features seven new chip designs, including 72 Rubin GPUs and 36 Vera central processing units.

Innovating at the speed of light

Nvidia's record buyback authorization is a product of its impeccable profitability and sheer size. It is not, however, a sign that the company is transitioning into a stodgy, low-to-moderate growth company.

In his book The Nvidia Way, author Tae Kim discusses how Nvidia's Speed of Light concept was an integral reason the company was able to endure an intensely competitive landscape in its early years. The concept is rooted in pushing the limits of what Nvidia's talent and resources can deliver under expedited timelines, rather than using prior accomplishments or competitors' actions as a yardstick.

In the 1990s, other chip companies would operate on a one to two-year product development cycle, which left them vulnerable to riding a big hit only to see their market share erode if their next launch failed. Nvidia fell into the same trap and almost went bankrupt multiple times. Nvidia then condensed its product launches to six months as a way to keep cash flow coming and avoid taking its competitive moat for granted.

Nvidia CEO Jensen Huang embodies Nvidia's relentless work culture to this day. Nvidia could have easily ridden the coattails of Blackwell for longer and kept Rubin in its back pocket, but Nvidia doesn't behave like the world's most valuable company. It behaves like a company that doesn't take its industry-leading position for granted.

Nvidia also recognizes that its heavy reliance on a handful of hyperscale customers leaves it vulnerable to cyclical spending pullbacks. This is why evolving beyond one-off chip sales to rack-scale data center solutions that deliver the greatest cost efficiency for its customers is so important. On top of that, Nvidia is making compute more accessible and transferable to a non-hyperscale customer base by partnering with financial institutions to create an investable AI infrastructure asset class. Third-party capital will fund the build-out of AI infrastructure that can be sold to AI labs, AI start-ups, cloud providers, and enterprises seeking the flexibility to use varying levels of compute without the risks and capital commitments of building it themselves.

Nvidia remains a high-octane growth stock

A bloated buyback budget can sometimes indicate a company is out of good ideas and looking for ways to appease shareholders. But Nvidia's record authorization is simply a product of how profitable its business has become and of management's confidence in its roadmap to generate even higher FCF going forward as AI compute demand increases.

Nvidia's buyback announcement does not mean the company is taking its foot off the gas when it comes to AI innovation. Nvidia's culture still prioritizes organic growth over everything else. There's every reason to believe that will continue, given Nvidia's optimism about compute demand for agentic AI and physical AI, such as self-driving cars and robotics.

Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

Nvidia (NASDAQ: NVDA) has been the "go-to" stock for investors looking for an artificial intelligence (AI) win. The company has built a massive business that revolves around this high-growth industry, offering chips, complete systems, enterprise software, and more. All of this has translated into explosive revenue growth -- and the stock price has climbed in lockstep during most of this journey.

This year, Nvidia stock is still on the rise, but momentum has slowed amid investors' concerns about inflation and geopolitical problems. These worries often weigh on demand for growth-oriented stocks like Nvidia and other AI players as they depend on a strong economy. At the same time, some investors have also questioned the pace of investment in AI infrastructure and worry that any slowdown could be bad news for Nvidia.

Considering the full picture, should you buy Nvidia stock in October? Here's what its decade-low valuation signals.

Image source: Getty Images.

The three reasons behind Nvidia's successes

Before we talk valuation, let's take a look at the Nvidia story so far. This tech giant became an AI superpower for three reasons: First, it has the right product. Nvidia makes the world's top-performing graphics processing units, offering the speed and efficiency that make them perfect for AI workloads. Second, Nvidia recognized this well before the AI boom began and got in early. The company shifted the focus of its GPUs to AI about a decade ago. Finally, Nvidia regularly updates its GPUs, and this makes it difficult for rivals -- who started serving the AI market later in the story -- to catch up.

As I mentioned earlier, Nvidia hasn't stuck with only GPUs. The company expanded to offer a great variety of products and services so that customers don't have to seek out solutions from a number of providers. They could turn uniquely to Nvidia for a complete package. The company has also developed platforms to serve specific industries, such as automotive, and has expanded its reach through the AI ecosystem. For example, Nvidia recently agreed to buy open-source AI platform Hugging Face for more than $12 billion, a move that could further boost the popularity of the company's products and services.

Nvidia's efforts in the AI space have produced tremendous results from an earnings perspective, too. The company has delivered double- and triple-digit growth quarter after quarter in recent years. In the latest three-month period, revenue and profit climbed in the triple digits to $96 billion and $59 billion, respectively.

Nvidia's stock price momentum has slowed

Still, Nvidia's stock hasn't been as buoyant as it was over the past few years. After climbing 1,100% over the past three calendar years, Nvidia now is heading for a 20% increase in 2026. This isn't due to a specific problem at Nvidia, but instead to the market headwinds I spoke of above.

So, now the question is: Should you buy Nvidia stock in October? A great place to start is with a look at valuation. Nvidia's has tumbled, and the stock trades at 28x trailing 12-month earnings, near its lowest level in a decade.

This could be a rare bargain buying opportunity, considering Nvidia's role and strength in the AI market. As we can see from the chart below, after reaching such levels in the past, Nvidia went on to gain.

NVDA data by YCharts

Of course, it's important to note that the general market environment or even a temporary pause in AI spending could slow down the stock's progression. But these elements don't change the long-term AI outlook. Analysts expect the AI market to advance into the trillions of dollars as of early next decade, and this is supported by the idea that AI is in the early days of its real-world-use story. The technology has been developed, and it continues to develop, but the application of it is just beginning, and this suggests there's room for growth for many years to come.

Nvidia, as a chip designer that's proven its ability to maintain its lead and grow its presence, is well-positioned to benefit. That's why it's a great idea for long-term investors to buy Nvidia stock now in October, while it's trading at a decade-low valuation.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

The market cap reflects the total dollar value of a publicly traded company's outstanding shares. If a company has 1 billion shares at $8 per share, it has an $8 billion market cap.

I look at this number before buying any stock because it highlights an investment's growth potential. While market cap isn't the only thing to consider, it's a critical part of my stock analyses. Here's why I put so much value into this number.

Image source: Getty Images.

The different types of market caps

A $5 trillion company is a bit different from a $500 million company, and that's why investors use multiple categories to describe stocks by market cap. Here's the brief summary:

• Micro-cap stocks: Market cap under $300 million
• Small-cap stocks: Market cap between $300 million and $2 billion
• Mid-cap stocks: Market cap between $2 billion and $10 billion
• Large-cap stocks: Market cap between $10 billion and $200 billion
• Mega-cap stocks: Market cap above $200 billion

Smaller companies are riskier but have a higher potential upside, while large-cap and mega-cap stocks are treated as more mature companies. They have a lower potential upside, but they also have less risk.

Large-cap and mega-cap stocks can still outperform smaller companies. Mega-cap stock Nvidia (NASDAQ: NVDA) is up by more than 20% year to date, easily outperforming the S&P 500 and most small companies.

However, I usually stay away from large-cap and mega-cap stocks. Some micro-cap stocks are in my portfolio, but my sweet spot is small-cap and mid-cap stocks.

Finding the next Nvidia requires understanding market caps

Many investors wish they could find the next Nvidia. Some people actively search for those types of growth stocks, while others read articles that explain why a certain stock can become the next Nvidia.

In most cases, this means looking for a stock that can deliver a 10x return, and for that, you have to focus on smaller companies.

Micron (NASDAQ: MU) has become a large player in the AI trade as its memory chips continue to fly off the shelves. However, Micron also has a $1.2 trillion market cap. The company would have to reach a $12 trillion market cap, more than twice Nvidia's current valuation, to produce a 10x return.

It's much easier for a $2 billion company to become a $20 billion company than it is for a $1.2 trillion company to soon command a $12 trillion valuation. That's why my memory plays are Penguin Solutions (NASDAQ: PENG) and Netlist (OTC: NLST) instead of Micron. Both of these companies have market caps under $5 billion and have more than doubled their memory revenue year over year.

A low market cap does not guarantee better returns

I'm not just buying more shares of Penguin Solutions and Netlist because I like their market caps. I primarily build these positions because of good fundamentals. They are exposed to the growing memory chip industry and have attractive multiyear tailwinds.

A market cap under $10 billion serves as an invitation for me to do more digging. Then I review earnings reports and presentations to assess the company's current direction.

Most stocks underperform the broader market, and that's especially true for smaller companies. The Russell 2000 Index, the small-cap benchmark, is up by less than 30% over the past five years. The S&P 500 has gained more than 70% over that same stretch.

Ironically, the Russell 2000 Index is a great place to find smaller companies that can crush the giants. However, this benchmark is filled with too many small-cap companies, which minimizes the impact of 10x performers. For instance, the benchmark's largest holding makes up less than 0.5% of the entire fund.

Companies with smaller market caps are more volatile and can result in significant capital losses for some positions. However, a single small-cap stock that can 10x will undo the losses of smaller positions. Prioritizing companies with smaller market caps increases the likelihood of compelling returns, but it's an opportunity only suitable for investors who can stay on top of their investments and read the news every day to learn new things.

Marc Guberti has positions in Netlist and Penguin Solutions. The Motley Fool has positions in and recommends Micron Technology, Nvidia, and Penguin Solutions. The Motley Fool has a disclosure policy.

It's no secret that spending on AI data centers is booming, and projections for hyperscaler spending suggest the boom will continue. This will create opportunities for ongoing marginal growth for companies that provide the raw materials used in construction, such as copper miner Freeport-McMoRan (NYSE: FCX), construction materials company Vulcan Materials (NYSE: VMC), and data center infrastructure company Vertiv (NYSE: VRT).

Copper and Freeport-McMoRan

The chart below shows the scale of the spending increase, and although not all of it is allocated to physical data centers, it indicates a considerable marginal increase in end demand for these three companies.

Data source: Visible Alpha. Chart by author.

You can't build a data center without the copper to create and transmit power to it, and also within it. According to S&P Global's "Copper in the age of AI" report, AI and data centers are set to contribute 13.7% of total copper demand growth from 2025 to 2030, with the energy transition (EVs, renewable energy, transmission, and distribution) contributing 59%. Much of the demand for transmission and distribution also comes from data center build-outs.

The forecast 18% increase in copper demand from 2025 to 2030 may not sound like much, but it implies a gradually widening gap between demand and baseline copper supply, which will continue to grow until, by 2040, copper demand of 42.3 million tons is forecast to exceed supply by 10.1 million tons.

These forecasts imply a bullish outlook for copper prices, which is great news for Freeport-McMoRan, a copper company with ample reserves, opportunities to expand existing sites, and a nascent low-cost leaching technology to recover copper from existing stockpiles.

Image source: Getty Images.

Vulcan Materials

The aggregates company Vulcan Materials also explicitly linked electricity infrastructure demand to data centers. Speaking on the company's second-quarter earnings call, CEO Ronnie Pruitt said, "Large project opportunities continue to drive nonresidential activity, particularly data centers." In addition to the direct demand coming from data centers, he noted, "We've also seen a pickup in LNG projects along with energy generation and power infrastructure expansion, which is really being driven by the data centers."

The marginal increase in demand from non-residential construction, driven by power/data centers, is supporting the kind of "slow and steady" demand Pruitt covets, and it will also underpin demand while Vulcan waits for the more cyclical residential sector to return.

US Residential Construction Spending data by YCharts

Vertiv, an AI infrastructure company

Vertiv's power, cooling, and IT infrastructure solutions have made it the darling of investors looking to buy stocks with exposure to AI build-out spending. As such, investors closely watch its order patterns as early indicators of data center spending.

The company's latest update indicates an end market that continues to strengthen. Discussing its order pipeline at a recent Goldman Sachs conference in September, Vertiv CEO Giordano Albertazzi said: "We see no sign of weakening. If anything, we're seeing strength that the pipeline is getting stronger and stronger, and our customers' resolve and building plan continue to evolve in the right direction."

The full-year guidance on the second-quarter earnings call was for a 37% increase in revenue and a 60% increase in earnings per share (EPS) over 2025, but if Albertazzi's commentary leads to stronger order growth, then investors can pencil in more revenue and earnings growth in the future.

That growth is likely to be enhanced by Vertiv's exposure to a new class of high-voltage and higher-productivity data centers for which Nvidia is developing architecture. Vertiv believes commercial adoption of the solutions it's developed for the new 800 volt direct current (VDC) will begin in the second half of 2027, with "volumes in 2028." That should kick off a new growth phase for the company.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group, Nvidia, Oracle, and Vertiv. The Motley Fool has a disclosure policy.