NVDA in "Such a Strong Position:" How $150B Buyback, AI Sandbox Safety Boost Tech Morale

SPEAKER_1 (0:00)

And turn our attention to Nvidia, which is doing a lot of the heavy lifting today with Max Weinbach, who's the tech analyst at Creative Strategies. Max, always nice of you to join us. Thank you so much for your time. So there are multiple parts to this story. Obviously, you've got the buyback news, you've got the software security, AI news, and then you've got the China angle to all of this. But a lot of people have been arguing that the two former are very closely linked. They're kind of the same story with the buybacks and AI security. Just walk us through your initial take.

Max Weinbach (0:28)

I think the buybacks for Nvidia are more of a sign of confidence than anything else. They're generating so much money that they can afford to buyback.

Now, with their authorize for $235 billion in buybacks, as well as to continue investments into R&D data center, investments into other companies to help grow the AI ecosystem and all their hyperscalers as well. It's just in general, I think, it shows they're in such a strong position that it's a good sign to the market.

SPEAKER_3 (0:57)

Max, how much of this equation is about the employees? Because employee equity is one of the many ways that Nvidia attracts top talent, especially engineering talent for a company like Nvidia. How significant has that been in terms of share dilution? I mean, that's the one part of the conversation that's a bit obvious, but nobody's really talking about the offsetting of that here.

Max Weinbach (1:20)

I think as they start to compensate their employees more, and these become larger awards as part of just the overall growth to the company, it's not insignificant amounts of awards and shares being given back as compensation. This does help alleviate some of the stress on dilution and whatnot.

It's a relatively small portion, don't get me wrong, but I think in general, it's just important to say this is not just, I know in some other companies, let's say EPS padding, if you were to keep the revenue all the same and just have this now in EPS, it's like a 4% difference, it's nothing in the grand scheme of things. But I think all of these little parts add up to the whole story here, which is just Nvidia is super strong now, and they don't have to worry about dilution as much, and they can buy back and help compensate their employees now more and they can use it as a stronger way for attracting, I would say, top talent as they're trying to grow this open model ecosystem.

SPEAKER_1 (2:21)

It certainly has seemingly put a floor under the stock today at least. I mean, we know that the valuation has come down in recent quarters. I'm just wondering how much of the move we're seeing today in Nvidia, particularly against the backdrop of the broader semi-sell-off, you would attribute to the buyback plan versus what we're hearing about the AI security software.

Max Weinbach (2:47)

I think a lot of it would be the buyback. But again, I consider this significantly more like a sign of strength over anything else because it's a large number in general. I mean, this would have been the market cap of quite a few of these massive companies 10 years ago. Now it's just a, I wouldn't say casual, but it's a big buyback for them.

I think in general, this morning they did have their announcement around sandboxing and some of their solutions for AI security. And that is a very, very strong sign for them. But it also, the other side of this is, well, if AI security is a problem and we really don't have solutions to it, Nvidia may have one, is this going to put, as Sam and Dario have consistently mentioned, a pause on overall development? And in general, I don't necessarily think it would. But these are questions people are going to ask, and obviously it's going to affect the overall stock price and everything going on with it.

SPEAKER_3 (3:50)

And Max, how are you looking at this announcement? I mean, it wasn't just we've released this new safety software, the OpenAgent Safety Platform. They came out and said things like we could have prevented Hugging Face and we could have done it in milliseconds.

I mean, they certainly have a reference point here as they're acquiring Hugging Face, so they probably have very detailed information about the attack itself, but also, as you mentioned, with Dario Amadei and Sam Altman pushing for this pacing and this slowdown, this is arguing essentially the opposite. AI safety is an engineering and infrastructure problem here as opposed to something that needs to be quelled. So how are you looking at where that fits in this broader narrative? Alex Coffey was highlighting he was surprised in the reaction or the lack thereof of some of the cyber names in response to this.