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Nvidia Overvalued? Wedbush Says Yes.

Analysts at Wedbush expressed concern about Nvidia's valuation while maintaining that the chipmaker's fundamentals are undeniably excellent.

Nvidia  (NVDA) - Get Free Report received a mixed review from Wedbush after the chipmaker reported a 50% jump in third-quarter revenue, led by rising demand for its videogames and data center offering.

The investment firm called the Santa Clara, Calif., company's stock "expensive," expressed concern about its deal to acquire U.K. chip-design company Arm, and said revenue guidance for data centers was "less impressive."

"Net, fundamentals for Nvidia were undeniably excellent; the question, in our view remains: is growth enough to justify a multiple beyond the [50 times] our fiscal 2024 estimates that we are valuing Nvidia at currently?" wrote Wedbush analyst Matt Bryson in a note to investors on Thursday.

Bryson cautioned that Nvidia again indicated that "some licensees have expressed concerns about the deal and that regulators are taking a closer look at the transaction." 

"Again, we remain skeptical that this deal will be approved by regulators," he added.

Shares of Nvidia at last check jumped 8.1% to $316.37. Nvidia is the largest chip company in America by market value.

Wedbush has a neutral rating for Nvidia with a price target of $300 a share.

Nvidia forecast revenue in the range of $7.2 billion, plus or minus 2%, while adding that its new omniverse set of augmented-reality software tools -- which support designers in the burgeoning metaverse -- will eventually draw $1,000 a year from 40 million creators.

"We view guidance as slightly less impressive as sequential growth in data center is more in line with our prior expectations," the analyst wrote.

Nvidia beat Wall Street consensus estimates by 6 cents a share with a third-quarter bottom line of $1.17 a share, powered by the revenue surge to $7.1 billion.

Data-center revenue, which account for some 41% of Nvidia's overall total, rose 55% to $2.94 billion. Gaming was up 42% to $3.22 billion, while crypto mining added a $105 million boost.

"With artificial-intelligence growth and expectations around future opportunities in the omniverse and multiverse driving Nvidia's multiple, we see this result as positive for Nvidia," the note added.