Nvidia stock (NASDAQ:) is gaining momentum. The stock has risen 58% in the past year. The valuation of Nvidia (NASDAQ:) stock is far too high for me, even though the firm has incredible growth prospects.

Investors who are keen to chase the name must be mindful of the potential dangers before they pay the high price commanded by Mr. Market. I will remain neutral about NVDA stock until the return/risk ratio improves. TipRanks has Nvidia stock charts.

Nvidia keeps raising the bar

Nvidia posted another impressive round of earnings results late in August. The second quarter Fiscal 2022 results easily beat Wall Street expectations. This was due in part to Nvidia’s strong gaming and data center business. The management also offered investors an injection of joy by promising more strength.

Nvidia has a number of new exciting products in the pipeline that will slowly be coming out over the next few years. This makes it a compelling case to continue its market-crushing wins and strong returns for investors.

Jensen Huang, CEO, is one of Silicon Valley’s most innovative minds. It is well worth the premium. He is an amazing manager and it would be a mistake to place a bet against him. Nvidia stock trading at over 74 times trailing earnings.

In addition, another spectacular “beat-and-raise” set the standard so high that it is hard to imagine anything lower than perfect.

Nvidia Epic Rally: Potential Risques

Nvidia is a stock that you should avoid solely for its valuation. This would mean you missed out on Nvidia’s amazing rally in the last few years. It’s difficult to imagine any safety margin with Nvidia stock given its multiple expansions and pricing in many years of innovation.

Unexpected obstacles could also present themselves before NVDA stock. A continued opening of the economy may impact gaming and cause modest growth in Nvidia’s gaming business segment in the medium term.

A further sell-off of cryptocurrency markets may also hurt the demand for hardware for mining. Nvidia wants its chips used more by gamers than miners. However, the recent surge in demand is nothing short of astounding.

Wall Street Take

According to TipRanks’ consensus analyst rating, NVDA stock comes in as a Strong Buy. From 25 analysts ratings there are 23 Buy recommendations, 1 Hold recommendation, and 1 Sell recommendation.

As for price targets, the average Nvidia price target is $238.81. Price targets for analysts can range anywhere from $185.00 per Share to $300.00 Per Share.

The bottom line on NVDA stock

Nvidia is so loved that it’s difficult to ignore its incredible demand and yet another hit for the RTX series of hardware. This company is firing on all the right cylinders.

However, it is impossible to know how many years the company has been topping its earnings. I am more likely to wait for the company’s name to pull back, than try and chase it higher.

The consensus price target is only 15% higher than current levels, even though analysts are still overwhelmingly bullish.

Disclosure: Joey Frenette is not a shareholder in any of the mentioned companies at publication.

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