Why Nvidia just got a rare stock downgrade

• Nvidia stock was downgraded to 'Neutral' by NewStreet Research on valuation concerns.
• Analyst Pierre Ferragu cited limited upside in the shares after a 157% year-to-date rally.
• "We would be buyers again, but only on prolonged weakness," NewStreet Research said.

Nvidia stock got a rare downgrade on Wall Street on Friday.

NewStreet Research analyst Pierre Ferragu downgraded shares of the artificial intelligence powerhouse to "Neutral" from "Buy" in a Friday note, arguing that the stock appears to be fully valued.

Ferragu hasn't necessarily turned bearish on the stock. The analyst has a one-year and two-year price target of $135 and $143, respectively, representing potential upside of 6% and 12% from current levels.

He's simply less bullish than he has been recently, and less optimistic than much of the rest of Wall Street.

"We see limited further upside based on what we hear from the value chain," Ferragu said. "We downgrade the stock to Neutral today, as upside will only materialize in a bull case, in which the outlook beyond 2025 increases materially, and we do not have the conviction on this scenario playing out yet."

Ferragu said that while Nvidia still has the strongest AI franchise amongst its competitors, a "more prudent view on the stock" is necessary after its year-to-date rally of 157%.

"The quality of the franchise is nevertheless intact, and we would be buyers again, but only on prolonged weakness," Ferragu said.

Downbeat opinions on Nvidia are rare among Wall Street analysts, with 89% of the 72 analysts who cover the company rating the stock a "Buy," according to data from Bloomberg.

Ferragu's $135 price target falls in-line with the average 12-month price target on the stock at $134.77.

On the more bullish side, some expect Nvidia's meteoric rise to keep going, with one analyst predicting the stock will nearly double to a $6 trillion valuation by the end of the year.