Nvidia shares dropped Wednesday after Citron Research tweeted it sees the stock going back to $90 in 2017.
The stock fell 7 percent to $108.69, but later recovered some of those losses. It ended the day more than 6 percent lower at $109.25.
The short-seller firm cited risk from "emerging" data center competition next year from Intel and Advanced Micro Devices. In addition, Citron Research said Intel has a profit margin advantage as it manufactures chips itself.
"There's a lot of risks to this business going forward," Citron Research's Andrew Left told CNBC's "Fast Money" on Wednesday. "It's really transferring their revenue from where it is right now — gaming — to data centers. It's capturing more of the auto market. It's maintaining margins. Obviously they have AMD coming into the gaming market. ... If you own the stock, the easy money's been made."
Even with Wednesday's declines, Nvidia shares are still up more than 231 percent this year. The stock is still the No. 1 performer in the .
Competition has always been there, said Romit Shah of Nomura Instinet, who upgraded Nvidia's stock to a "buy" in June. But Nvidia has more sustainability today, with artificial intelligence and self-driving cars to offset uncertainty around PC gaming, Shah said.
"All the momentum has been in one direction," Shah told CNBC's "Power Lunch" on Wednesday, before Left's CNBC appearance. "Yes, I do think the stock, at nearly 40 times next year's earnings, is overvalued. But ... I wouldn't be selling it today in front of CES next week where there's going to be a lot of hype around artificial intelligence, self-driving cars. These are things that the company's tied to. Typically investors tend to bid up stocks like that into an event like CES."
Shah called Nvidia's valuation "astronomical," but he said he sees positive catalysts ahead.
Nvidia declined to comment on Citron Research's tweet.
— CNBC's Anita Balakrishnan contributed to this report.