Leader in AI chips Nvidia will have an embarrassment of riches in the coming years, and shareholders will be rewarded, a technology analyst has predicted.
Ben Reitzes, Managing Director and Head of Technology Research at Melius Research, told CNBC on Wednesday that Jensen Huang’s Nvidia has mastered a “full stack” approach with its hardware and software, which gives it a key advantage in AI.
“What they’ve done is they’ve built a computer language and an ecosystem that allows you to monetize AI, and obviously they’re killing it,” he said. declared.
Reitzes has a $160 price target on Nvidia stock, implying a 30% gain from Friday’s closing price. sale in progress which began earlier this month, shares have climbed 150% so far this year after more than tripling in 2023. Of the 7 beautiful stocks he covers, Nvidia has the most upside potential, he added.
Another big advantage Nvidia has over its competitors is its annual cadence of innovative new products, Reitzes said. That means developers and customers will know where Nvidia is headed and can budget for upgrades accordingly.
“And they’re running 150 miles per hour while everyone else is running 100. It’s going to be hard to catch up with those guys,” he said.
Given Nvidia’s advantage in the booming AI sector, Melius Research predicts the company will generate $270 billion in cash over the next three years, potentially paving the way for huge returns for shareholders.
Management may not be very enthusiastic about doing stock buybacks because such deals are often associated with older companies, Reitzes said. But in his opinion, it’s obvious.
“Nobody talks about it, and when you do the model we do, it makes a lot of money,” he said. “And they can’t do anything. This government won’t let them buy something big. They can’t invest that much in R&D. It’s just not possible. So we have to get it as shareholders.”
Certainly, Nvidia has returned capital to its shareholders. In August, it announced a $25 billion buyback program. And last month, Nvidia increased its quarterly cash dividend by 150%, from $0.04 per share to $0.10, the equivalent of $0.01 per share after the split.
Nvidia declined to comment on the possibility of further share buybacks.
For his part, Reitzes was quick to point out that any future acquisitions would not imply that Nvidia has stopped growing. “It’s not an insult to buy back stock if you have nothing else to do.”
Nvidia’s recent financial results show that its ability to generate cash is accelerating. In the fiscal year which ended in January, Nvidia’s net cash from operating activities climbed to $28.1 billion, up from $5.6 billion a year earlier.
And in the first quarter In the fiscal year ended April, net cash generated by 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 absolute reference for AI training chips, fearing that competitors would eat into its market share.
Nvidia’s deployment Blackwell The system’s deployment later this year will only solidify that lead, he said at the company’s annual shareholder meeting on Wednesday.
“The Blackwell architectural platform will probably be the most successful product in our history and even in the entire history of computing,” Huang said.
This story was originally featured on Fortune.com
