BofA: $26–51B Buybacks, 0.5%–1% Yield Could Close Nvidia’s 50% P/E Gap
NVDA•Bank of America analysts propose Nvidia boost shareholder returns by increasing dividends to 0.5%–1% and funding $26–51 billion in buybacks to narrow its nearly 50% P/E discount versus Magnificent Seven peers. Nvidia trades at 26x 2026 estimates versus a peer average of 49x while projected to generate over $400 billion in free cash flow during 2026–27.
1. Capital Return Proposal
Bank of America analysts argue that a more aggressive capital return program—boosting dividends to 0.5%–1% and deploying $26–51 billion in buybacks—could broaden Nvidia’s investor base and serve as a catalyst for a valuation re-rating.
2. Valuation Gap
Despite a market cap of roughly $5.08 trillion, Nvidia trades at 26x 2026 and 19x 2027 estimated earnings versus a peer average of 49x and 41.5x, representing nearly a 50% discount on a P/E basis and about 30% lower on a free cash flow multiple.
3. Free Cash Flow Forecast
Nvidia is projected to generate over $400 billion in free cash flow across 2026 and 2027 combined, matching the combined FCF of Apple and Microsoft during the same period.
4. Dividend Yield Dynamics
With a near-zero dividend yield of 0.02%, Nvidia is held by just 16% of equity income funds compared to a peer average of 32%, underscoring its limited appeal to income-focused investors.
