Tech analyst Ben Reitzes from Melius Research predicts that Nvidia, the AI chip leader, will experience substantial growth in the coming years, resulting in enormous financial success and benefits for shareholders. Reitzes believes that Nvidia's mastery of a "full stack" approach, encompassing both hardware and software, provides the company with a significant advantage in the field of AI.

Reitzes explains that Nvidia's creation of a computing language and an encompassing ecosystem facilitates the monetization of AI, an accomplishment that has been highly successful for the company. The tech analyst has set a price target of $160 for Nvidia stock, which would imply a 30% gain from the closing price on Friday. Despite a recent market downturn, Nvidia's shares have surged by 150% this year and more than tripled in 2023, making it the stock with the most potential among the "Magnificent 7" stocks that Reitzes covers.

One of Nvidia's key advantages over its competitors is its ability to consistently innovate new products on an annual cadence, according to Reitzes. This proactive approach allows developers and customers to anticipate Nvidia's future offerings and plan for necessary upgrades. Reitzes metaphorically describes Nvidia's swiftness in comparison to other companies, stating that "they're running 150 miles an hour while everyone else is running 100," making it difficult for rivals to catch up.

Based on Nvidia's dominant position in the thriving AI market, Melius Research projects that the company will generate a staggering $270 billion in cash over the next three years, potentially setting the stage for significant returns for shareholders. While management may not openly discuss the possibility of stock buybacks, Reitzes believes it is inevitable given Nvidia's immense cash flow potential. Reitzes asserts, "No one's talking about it, and when you do the model we do, it's a cash gusher. And there's nothing they can do. This government's not going to let them buy anything big. They can't invest that much in R&D. It's just not possible. So we gotta get it as shareholders."

Notably, Nvidia has already been returning capital to shareholders, having announced a $25 billion repurchase program in August. In addition, the company recently increased its quarterly cash dividend by 150%, reflecting its commitment to rewarding shareholders.

Nvidia's financials demonstrate an accelerating ability to generate cash. In the previous fiscal year that ended in January, Nvidia's net cash provided by operating activities reached $28.1 billion, a substantial increase from $5.6 billion in the previous year. In the first quarter that ended in April, net cash provided by operating activities amounted to $15.3 billion, which already exceeds half of the previous year's total.

At the company's annual shareholder meeting, Jensen Huang, Nvidia's CEO, assured investors that Nvidia will remain the gold standard for AI training chips, dispelling concerns about potential market share erosion from rivals. Huang emphasized that the introduction of Nvidia's Blackwell system later this year will solidify the company's leading position in the field, stating, "The Blackwell architecture platform will likely be the most successful product in our history and even in the entire computer history."