Nvidia’s (NASDAQ:) explosive growth has created a new challenge: how to deploy an unprecedented amount of cash in a world where scale itself has become a regulatory constraint. The chart below, from The Wall Street Journal, illustrates Nvidia’s massive free cash flow growth.
However, traditional uses of its cash, such as large acquisitions, are increasingly difficult given heightened scrutiny around AI infrastructure and market dominance. Nvidia’s cash strategy is now being shaped as much by regulation as by opportunity.
That dynamic helps explain Nvidia’s recent $20 billion “nonexclusive licensing agreement” with AI startup Groq. Rather than pursuing a full acquisition, Nvidia structured the deal to gain access to talent and inferencing technology without triggering the regulatory hurdles that would likely accompany an outright takeover. In effect, Nvidia’s cash strategy has shifted toward creative partnerships and licensing arrangements that avoid antitrust flashpoints.
Regulators, however, may find themselves under growing political pressure to show flexibility. Global competition for AI chip leadership is intensifying, particularly as the U.S. seeks to maintain an edge over China. Aggressively constraining Nvidia’s ability to invest, hire, or partner risks undermining America’s position in a strategically critical industry. While antitrust scrutiny is unlikely to disappear, the geopolitical importance of AI chips could lead to more lenient enforcement at the margins.
For investors, Nvidia’s cash strategy is less about financial excess and more about preserving its competitive moat. As AI workloads increasingly shift from training to inferencing, access to specialized technology and engineering talent will matter as much as raw compute. Nvidia’s ability to navigate regulation while deploying capital effectively may ultimately determine how long it can sustain its dominance in the AI ecosystem.
Are Small and Mid-cap Stocks Poised for a Comeback?
We kick off 2026 with a review of 2025 equity performance, focusing on size and style factors. The graphic below shows that large-cap stocks dominated across the board in 2025. Within the large-cap size cohort, growth stocks outperformed value stocks significantly. That’s not unusual given the incredible market performance over the past year.
What is unusual, however, is the degree to which large-cap stocks outperformed small- and mid-cap stocks last year. This raises the question: Will small- and mid-cap stocks experience a resurgence this year, or will the performance gap continue expanding?
