In a recent analyst call, New Street Research downgraded chipmaker Nvidia (NVDA) to a Neutral rating, citing limited further upside for the tech giant going forward. The downgrade comes as a blow to Nvidia, which has witnessed a significant rally in recent years.

The downgrade raised questions about the valuation of Nvidia, as the stock has experienced a remarkable run, gaining over 150% in value. Analysts have pondered why the rally should stop at this point, considering the strong performance of the company. However, the New Street Research analyst believes that the stock is currently fully valued and sees potential upside only in a bold case where the outlook beyond 2025 improves significantly.

One of the concerns raised by the analyst is the uncertainty surrounding the outlook beyond 2025. While Nvidia has demonstrated its prowess and attracted investors with its innovative technologies, such as artificial intelligence, there is still a need for faith in the company's long-term prospects. The quality of Nvidia's franchise remains intact, but the analyst is cautious about the stock's valuation.

To understand the context, it is worth considering Nvidia's performance over the past year. The stock experienced a period of stagnation for about five to six months before starting a new rally at the beginning of this year. This pattern of consolidation, followed by a move to the next level, is characteristic of a textbook rally. The analyst suggests that Nvidia may need some time to garner new interest and potentially consolidate at its current levels.

The downgrade from New Street Research comes at a time when Nvidia's concentration in the market is at an all-time high. The stock has become a significant player, with its performance influencing the broader market. This concentration raises concerns about the potential impact if Nvidia were to falter. However, the market has shown the ability to remain concentrated for extended periods, making it difficult to predict any immediate risks.

As the news of the downgrade emerged, Nvidia's stock price experienced a decline, while other mega-cap companies in the market saw gains. This further highlights the concentration risk associated with Nvidia's performance and its potential impact on the market as a whole.

While the fundamentals of Nvidia remain strong, the technical outlook raises concerns among some investors. With the stock trading at an optically expensive valuation, investors are questioning where the next bid will come from and whether the stock can continue its upward trajectory.

It remains to be seen how Nvidia will navigate these challenges and whether the company can continue to deliver sustainable growth in the face of potential headwinds. As the market continues to evolve, investors will closely monitor Nvidia's performance to assess any changes in the company's long-term outlook.

Disclaimer: The information provided in this article is based solely on the details from the analyst call and should not be considered as investment advice. Readers are advised to conduct their own research and consult with a financial advisor before making any investment decisions.