Prediction: Nvidia Will Overtake Apple in Stock Buybacks and Dividends Under New Apple CEO John Ternus

Key Points

• Over the last 15 years, Apple reduced its share count by 43.2% under CEO Tim Cook.

• Apple could make more aggressive investments in expanding its hardware ecosystem under new CEO John Ternus.

• Nvidia is committed to returning half of its free cash flow to shareholders through buybacks and dividends.

• 10 stocks we like better than Apple ›

Over his 15-year tenure as CEO, Tim Cook grew Apple (NASDAQ: AAPL) from a market cap of around $350 billion to well over $4 trillion. The strategy was fairly straightforward.

Apple regularly releases new versions of its winning products like iPhone, Mac, and iPad; penetrates a few key product categories in wearables and headphones/earbuds; and expands its services (like app store revenue, advertising, iCloud, Apple Music, Apple TV, Apple Pay, etc.) to complement its hardware ecosystem.

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That strategy unlocked steadily rising profits and free cash flow (FCF), which Apple used to reinvest in its core business, grow its dividend, and buy back gobs of its own stock.

For years, Apple has had by far the largest buyback budget of any U.S. company. But that all could change under new CEO John Ternus.

Image source: Getty Images.

Apple is reducing buybacks even as earnings growth accelerates

Cook’s specialty was operations, but Ternus served as vice president of hardware engineering before becoming CEO. Hiring Ternus as CEO sends a clear signal to Wall Street that Apple is gearing up for a period of innovation rather than relying on its growing services network, marginal product upgrades, and stock buybacks to fuel earnings growth.

Even under Cook’s leadership, Apple has already been pulling back on buybacks as it geared up for major product upgrades and new releases discussed during Apple’s latest Sept. 9 event.

Data by YCharts.

As you can see in the chart, Apple’s trailing-12-month buybacks peaked at $100 billion but have since declined to $82.2 billion. Meanwhile, Nvidia‘s (NASDAQ: NVDA) buybacks have been surging in lockstep with its FCF, while major tech stocks like Microsoft, Meta Platforms, and Alphabet — which used to be buyback leaders — have since pulled back in buybacks as they invest heavily in artificial intelligence (AI).

Data by YCharts.

For years, Apple’s services sales were growing faster than its product revenue. But that trend has changed, as Apple reported its best third quarter in five years on July 30, which included an 18.1% year-over-year increase in product sales.

Granted, some of that jump could have been due to consumers anticipating price increases in response to rising memory chip costs. But it’s still encouraging to see Apple’s earnings growth pick up after years of sluggish results.

Nvidia’s capital return program has room to run

Under Ternus, I’d expect Apple to continue paying sizable, albeit lower, buybacks while also reinvesting more capital in the business to grow its product portfolio. Meanwhile, Nvidia looks well-positioned to continue expanding its capital return program.

In its latest quarter, Nvidia spent $19.73 billion on buybacks and $6.05 billion on dividends after raising its dividend by 2,400% earlier this year. Meanwhile, Apple repurchased $25.95 billion in stock and spent $4 billion on dividends in its latest quarter. Apple has increased dividends every year since 2012, but it tends to make very small mid-single-digit increases.

On its Aug. 26 earnings call for the second quarter of fiscal 2027, Nvidia said it returned 60% of FCF to shareholders so far this fiscal year, ahead of its 50% guidance. But even if Nvidia reverts to closer to 50% and continues to grow its dividend, it could still easily surpass Apple in buybacks.

Nvidia began shipping products under its latest Vera Rubin platform in August — which falls under Q3 fiscal 2027. Nvidia expects Rubin to make up a staggering 20% of Q3 data center revenue. The run-up for Rubin is so massive that Nvidia is guiding for a 70% year-over-year increase in fiscal 2028 revenue. And if Nvidia converts a similar amount of that revenue to FCF, meaning its FCF also increases by 70%, it will likely surpass Apple in buybacks next year, even if Apple keeps its buybacks steady.

Nvidia’s No. 1 priority is its organic growth. However, it’s raking in so much FCF that it can hit that goal while leaving plenty of cash left over to return to shareholders.

Nvidia is a better value than Apple

Over the last few years, Apple has resembled a bit more of a consumer staples stock than a tech stock, while Nvidia has been a hypergrowth stock. Under Ternus, I could see Apple becoming more growth-oriented. Whereas Nvidia is evolving into a dividend growth stock at a great value — as Nvidia trades at just 24.3 times earnings compared to 35.8 for Apple.

Data by YCharts.

Apple’s premium valuation has been built around its reliability — not its growth rate, similar to how Walmart and Costco Wholesale trade at elevated multiples due to their loyal customer bases and resilience in recessions. But if Apple shifts to a more growth-oriented capital allocation strategy, that will put pressure on the company to justify its higher multiple with accelerated earnings growth.

Apple isn’t cheap, but it remains a decent stock to buy and hold for investors who believe it can live up to expectations. However, Nvidia could ultimately prove to be the better long-term value, especially for investors seeking a company with a capital return program likely to grow.

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Wells Fargo is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Apple, Costco Wholesale, JPMorgan Chase, Mastercard, Meta Platforms, Microsoft, Nvidia, Visa, and Walmart. The Motley Fool has a disclosure policy.