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Nvidia is not a buy until it reaches this level, chart analyst says

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Would buy Nvidia if there's a pullback to around $220: Investing pro

Move over AMD.

There could be a new king of the chipmakers in the next few months, according to Citi analysts. The firm put Nvidia on its "positive catalyst watch," and named it its top semiconductor pick for the next few months. Analysts cited strong data-center growth in 2020.

Another Wall Street trader is bullish the stock.

"It should continue to outperform the group as a whole, so I do expect this relative strength over the rest of the semis to continue," Mark Newton, founder of Newton Advisors, said on CNBC's "Trading Nation" on Friday.

Still, he's not ready to jump in right here after a 33% rally in three months.

"It has gotten very overbought, and of course it was overbought throughout all 2016. You're starting to see evidence of really negative momentum divergence which is happening to the semi group as a whole. It's gotten very extended," said Newton.

He said he would look to buy the stock if shares pulled back to the $220 region. That implies 10% downside from Friday's close.

"But in general, I think the recent uptick in relative strength versus the group is still a very good thing and we didn't see that all last year. ... Nvidia was not anywhere in the top 10, whereas in the last six months the stock was up over 53% and so certainly, it started to make some inroads and I think that's a good thing so one would want to stick with that," he said.

John Petrides, portfolio manager at Tocqueville Asset Management, says the stock straddles different growth areas in the chips business.

"Nvidia is a perfect microcosm of the entire market actually because in the long term if you believe in augmented reality, virtual reality, gaming through the graphic side, well then Nvidia is an interesting way to play that," Petrides said during the same segment.

However, it does look expensive after its recent run-up, he warns.

"The stock is trading at 34 times earnings. It's not cheap, but I think that's a reflection of the overall tech sector which has rallied over the past couple years, and it's not cheap from a valuation standpoint, so I think long term, the stock is a great way to play some compelling long-term investment themes, but for short term, I wouldn't be surprised if there's a pullback," he said.

Nvidia has not traded at these multiples since mid-2019.

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