Nvidia turned red on Wednesday, giving up a sizable gain, even after what appeared to be impeccable results and guidance . That left investors and traders scrambling to find out why. One analyst may have the answer. Out of Wall Street's major investment banks, Deutsche Bank stood alone Wednesday with its neutral stance on Nvidia . The analyst seemed to be the only one with a negative comment on the artificial intelligence poster child following its report of earnings and revenue that exceeded consensus estimates, alongside a 66% year-over-year rise in data center sales. Ross Seymore gave mainly one reason: valuation. Seymore wrote that, although he remains bullish on Nvidia in the long run, his current rating reflects the fact that incredible expectations over the next two years already seem to be priced into the stock. "Overall, we remain very impressed with NVDA's continued leadership in AI compute, networking, software and systems capabilities, with the gap vs peers appearing more likely to expand than contract," the analyst said. But "we continue to see the shares as fairly valued with our $215 P/T implying a ~23x P/E on CY27 ests that already embed ~85% revenue growth over the next two years," he added. In other words, even when accounting for eye-popping revenue growth expectations for two years out, the stock trades at a high multiple. Using Street estimates for next year, Nvidia trades for an even higher 27 P-E, per FactSet. This comes after Nvidia shares have surged 39% this year. Seymore's note also included some other slight negatives like Nvidia's rapidly growing operational expenditures, China revenues continuing to lag and a decrease in the company's gaming business in what is traditionally its strongest quarter. To be sure, Deutsche Bank's $215 price target still sees 15% upside. But that pales in comparison to others like Barclays and Bank of America, which have forecasts that equate to a further 47% rally. The Dow gave up a 700-point gain as Nvidia rolled over. Traders cited reduced odds that the Federal Reserve would cut rates in December as part of the reason for the market's turn. But that could be a reason why Nvidia felt additional pressure, as lower rates are seen as key to justify the sky-high valuations of AI stocks.
