AI chip leader Nvidia will face an embarrassment of riches in the coming years, and shareholders will be rewarded, a technology analyst has predicted.
Ben Raitzes, Managing Director and Head of Technology Research at Melius Research, He told CNBC on Wednesday Jensen Huang’s Nvidia has mastered the “full stack” approach with its hardware and software, giving it a major advantage in AI.
“What they’ve done is they’ve built a computing language and an ecosystem that allows you to monetize AI, and they’re clearly doing that very well,” he said.
Reitzes has a $160 price target for Nvidia stock, which would imply a 30% upside from Friday’s closing price. Despite the ongoing sell-off that began earlier this month, shares are up 150% so far this year after more than tripling in 2023. He added that of the seven great stocks he covers, Nvidia has the most Upside in the future.
Another big advantage Nvidia has over its competitors is the pace at which new products are introduced each year, Reitzes said. This means developers and customers will know where Nvidia is headed and can budget for updates accordingly.
“They’re running 150 mph while everyone else is running 100 mph. It’s going to be tough to catch up with those guys,” he said.
Given Nvidia’s dominance in the booming AI space, Melius Research expects the company to generate $270 billion in cash over the next three years, which could pave the way for huge returns for shareholders.
Management may not be keen to promote the possibility of share buybacks because those are often associated with older companies, Ritzes said. But it is clear in his view.
“Nobody talks about it, and when you do the model we do, it’s a cash flow,” he said. “And there’s nothing they can do. This government won’t let them buy anything big. They can’t invest a lot in R&D. It’s not possible. So we have to get it as shareholders.”
Nvidia has certainly been returning capital to shareholders. In August, the company announced a plan to restructure its capital. $25 billion buyback programLast month, Nvidia increased its quarterly dividend by 150% from $0.04 per share to $0.10, which equates to $0.01 per share after the split.
Nvidia declined to comment on the possibility of further stock buybacks.
For his part, Reitzes was quick to point out that any future buybacks do not mean Nvidia has stopped growing. “It’s not an insult to buy back stock if you have nothing else to do,” he said.
Nvidia’s latest financial data shows that its ability to generate cash is accelerating. In the fiscal year That ended in January, Nvidia’s net cash provided by operating activities rose to $28.1 billion from $5.6 billion a year earlier.
And in First Quarter During the period ended in April, net cash flow from operating activities was $15.3 billion – already more than half of last year’s total.
Meanwhile, Huang told investors last week that Nvidia will remain the gold standard for AI training chips amid concerns that rivals could cut into its market share.
The introduction of Nvidia’s Blackwell system later this year will only advance that progress, he said at the company’s annual shareholder meeting on Wednesday.
“The Blackwell Engineering platform is probably the most successful product in our history and even in the entire history of computing,” Huang said.