Analyst says Nvidia will produce such huge ‘cash flow’ that it will have to buy back more stock because all that money has nowhere else to go

Leading AI chip company Nvidia One technology analyst predicted there would be an embarrassment of riches in the coming years, and shareholders would be rewarded.

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 it very well,” he said.

Reitzes has a $160 price target on Nvidia stock, implying a 30% gain from Friday’s closing price. Despite Continuous sales The stock, which launched earlier this month, is up 150% so far this year after more than tripling in 2023. Of the Magnificent 7 stocks he covers, Nvidia has the most upside ahead, he added.

Another big advantage Nvidia has over its competitors is its annual cadence of innovating new products, Ritzes said. This means developers and customers will know where Nvidia is headed and can budget upgrades accordingly.

“They run 150 miles an hour while others run 100 miles. It’s going to be hard to catch these guys,” he said.

Given Nvidia’s advantage in the booming AI space, Melius Research expects the company to generate $270 billion in cash over the next three years, paving the way for huge returns for its 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 this, and when you implement the model we do, it makes a lot of money,” he said. “And there’s nothing they can do. This government won’t let them buy anything big. They can’t invest that much in R&D. It’s just impossible. So we have to get it as shareholders.”

To be sure, Nvidia has been returning capital to shareholders. In August, A. announced $25 billion buyback programLast month, Nvidia boosted its quarterly cash dividend by 150% from $0.04 per share to $0.10, equivalent to $0.01 per share on a post-split basis.

Nvidia declined to comment on the possibility of further stock buybacks.

For his part, Reitzes was quick to point out that any future buybacks would not imply that Nvidia has stopped growing. “Buying back shares is not an insult if you have nothing else to do.”

Nvidia’s latest financials show 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.

The story continues

And in First Quarter Which ended in April, net cash 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 To acquire artificial intelligence training chips amid concerns that competitors may eat away at market share.

Nvidia Launch Blackwell The launch of the system later this year will only further that progress, he said at the company’s annual shareholder meeting on Wednesday.

“The Blackwell Architecture Platform is likely the most successful product in our history and even in the entire history of computers,” Huang said.

This story originally appeared on Fortune.com