Nvidia's $235 Billion Buyback Meets the Megawatt Question

Nvidia trades near its 52-week high as SpaceX weighs a $40 billion debt raise for its chips, while Morgan Stanley sees grid limits sparing 2027 forecasts.

Nvidia shareholders are approaching a point where the world's most valuable chipmaker must justify its valuation against two very different constraints: the willingness of customers to borrow against future AI revenue, and the physical limits of the US power grid.

The stock changed hands at EUR 213.50 in German trading, up 0.5% on the day and within 1.2% of its 52-week high of EUR 216.10. Two forces are driving the advance — a freshly expanded capital return program and an extraordinary wave of debt-financed hardware demand from major customers.

SpaceX Eyes $40 Billion Debt Raise for Nvidia Chips

According to the Financial Times, SpaceX is in early talks to borrow $40 billion specifically to purchase Nvidia processors. The package would combine $10 billion in bank loans with $30 billion in investment-grade bonds, with Apollo Global Management expected to lead the structuring.

That a blue-chip borrower would tap credit markets at this scale to equip its next generation of data centers underscores Nvidia's singular position in the AI supply chain. Morgan Stanley estimates total external financing needs for global AI infrastructure buildout through 2028 at $1.5 trillion.

The question for investors is whether this debt-fueled appetite for accelerators — demand for GB200 and GB300 systems remains unabated — can carry the stock into a durably higher valuation bracket, or whether it introduces a new dependency on the health of global credit markets.

Morgan Stanley: Grid Constraints Won't Derail 2027

Morgan Stanley weighed in Monday with a view that Nvidia is relatively well insulated from the power-supply bottlenecks now constraining data center operators. Critically, the analysts do not see these infrastructure hurdles threatening their 2027 forecasts.

The reasoning cuts to the heart of how AI revenue actually gets booked. The binding constraint is no longer order intake — it is how quickly operators can secure new grid connections. Without reliable transmission lines and substations, even the most advanced accelerator cards cannot be switched on. If grid delays mount, customers may push back delivery schedules, and Nvidia would recognize revenue later than planned. Available megawatts, in other words, are becoming the primary metronome for future sales.

In many US regions, lead times for specialty transformers stretch to several years, and high-voltage line permitting often crawls. Should grid capacity meaningfully slow data center expansion, growth rates could compress. Hardware that cannot be plugged in either sits undelivered or ties up dead capital at the buyer.

Buyback Firepower and a $108 Billion Quarter

Management has moved decisively on capital allocation. Nvidia authorized a $150 billion increase to its existing repurchase program in late September, bringing the remaining buyback capacity to $235 billion through fiscal 2028. A program of that magnitude underpins the share price, offsets dilution, and signals the company's ability to return substantial free cash to shareholders even while funding enormous research budgets.

The bull case rests on a high-performance computing monopoly cemented by Nvidia's technology roadmap. Management has guided to roughly $108 billion in revenue for the third quarter of fiscal 2027, and the company projects about 70% sales growth for fiscal 2028. Morgan Stanley continues to list the stock as its preferred semiconductor pick, pointing to the upcoming Rubin architecture as a step-change in efficiency for processing complex agentic models.

BNP Paribas recently raised its price target to $345, expecting adjusted gross margins above 70% and a market share exceeding 75% in AI computing. Cantor Fitzgerald reiterated a $350 target. On fiscal 2028 earnings estimates, the shares trade at a multiple of roughly 15 — and if Nvidia delivers that earnings jump at stable margins, the $150 billion buyback provides considerable leverage to earnings per share.

Receivables, Depreciation Schedules and Rival Silicon

Against that outlook sits a tangible risk. Nvidia generated $96.2 billion in revenue in the second quarter of fiscal 2027, but the trajectory of outstanding receivables remains a key gauge for market participants. The gap between reported net income and actual cash inflow — and the time it takes customers to pay for delivered hardware — is becoming the central test of the quality of Nvidia's growth.

If data center amortization timelines lengthen, a sharp pullback in investment from major buyers becomes possible. Alphabet, Meta and Amazon have already extended the book depreciation schedules for their servers to five or six years, while industry observers warn of premature value loss in older processor generations. Should AI-driven productivity gains fall short of expectations, credit-financed infrastructure projects could stall.

Competitive pressure adds another layer. AMD is pushing its own product lines, while hyperscalers including Google and Amazon are ramping custom in-house designs to reduce reliance on Nvidia's pricing power. If the company can no longer push through supplier price increases at the previous pace, margins come under fire. Rising receivables and a rate environment with 10-year US Treasury yields above 5% make large debt-financed projects more expensive for customers.

What to Watch Next

The path forward hinges on a clear set of markers. So long as large projects such as SpaceX's planned $40 billion financing are successfully placed in bond markets and Nvidia's operating margin holds above 70%, the uptrend remains intact — with the massive buyback cushioning the downside and paving the way for a re-rating.

Should customer willingness to pay falter, or should server operators' depreciation cycles come under tougher accounting scrutiny, valuation premiums face a meaningful correction. High multiples forgive no delays in revenue recognition.

The next fundamental catalyst arrives with quarterly reports from Microsoft, Alphabet, Amazon and Meta. Their actual investment budgets for the coming fiscal year will determine whether Nvidia's record valuation is backed by real cash flows — or whether the megawatt bottleneck writes a different story.