Nvidia, the AI chip leader, is poised for significant growth in the coming years, with shareholders set to benefit, according to tech analyst Ben Reitzes.
Ben Reitzes, managing director and head of technology research at Melius Research, told CNBC on Wednesday that Nvidia, under CEO Jensen Huang, has perfected a “full stack” approach with its hardware and software, giving it a crucial edge in AI.
“They’ve built a computing language and an ecosystem that allows you to monetize AI, and they’re excelling at it,” Reitzes said.
Reitzes has set a price target of $160 for Nvidia stock, suggesting a 30% increase from Friday’s closing price. Despite a recent selloff, shares have surged 150% this year after tripling in 2023. Among the Magnificent 7 stocks he covers, Nvidia shows the most potential, he added.
Nvidia’s annual innovation cycle gives it another advantage over competitors, Reitzes noted. This predictable release of new products allows developers and customers to plan for upgrades.
“They’re moving at 150 miles an hour while everyone else is at 100. It’s going to be hard to catch up,” he said.
Melius Research projects that Nvidia will generate $270 billion in cash over the next three years, positioning the company for substantial shareholder returns.
While Nvidia’s management may be hesitant to highlight stock buybacks, Reitzes sees it as inevitable. “It’s a cash gusher,” he said. “The government won’t let them make big acquisitions, and they can’t invest all of it in R&D. So, shareholders stand to gain.”
Nvidia has already begun returning capital to shareholders. In August, it announced a $25 billion repurchase program, and last month, it increased its quarterly dividend by 150%, from $0.04 to $0.10 per share.
Nvidia declined to comment on the potential for further stock buybacks.
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Reitzes emphasized that future buybacks wouldn’t signal a halt in Nvidia’s growth. “It’s not an insult to buy back stock if there are no better investment opportunities,” he said.
Nvidia’s financial performance supports this outlook. In the fiscal year ending January, net cash from operating activities jumped to $28.1 billion from $5.6 billion the previous year. In the first quarter ending in April, net cash from operating activities reached $15.3 billion, already surpassing half of last year’s total.
CEO Jensen Huang assured investors last week that Nvidia will continue to lead in AI training chips, despite competition. The upcoming launch of Nvidia’s Blackwell system later this year is expected to reinforce this leadership.
“The Blackwell architecture platform will likely be the most successful product in our history and perhaps in all of computing history,” Huang stated at the company’s annual shareholder meeting on Wednesday.
