(Bloomberg) -- A pronounced rally in Arm Holdings Plc has resulted in a sky-high valuation, to the point that even one of the chip-design company’s first stock bulls thinks it has gone too far.

New Street Research downgraded the stock to neutral from buy, a move that comes after a massive move in the share price this month.

Justifying the current valuation “would require extreme success” on all fronts, wrote analyst Pierre Ferragu. “Even with a generous 40x multiple on our above-consensus expectations, we don’t see a rationale to buy Arm above $110.” The stock closed at $137.95 on Tuesday, down 5.6% on the day, though it remains up 95% over the month of February.

The more cautious view from New Street is notable, as it was an early advocate of the stock. It started coverage on Arm in September, ahead of the pricing of the IPO, and it was the first firm tracked by Bloomberg to issue a rating.

Currently, half the analysts tracked by Bloomberg recommend buying the stock, while about 41% have the equivalent of a hold rating and the rest are bearish. The average analyst price target suggests downside of almost 30%.

February’s rally for Arm was sparked by a powerhouse forecast and earnings report, which triggered a one-day jump of 48%. The company touted the growth potential of artificial intelligence, which Chief Executive Officer Rene Haas said was “not in any way, shape or form a hype cycle.”

Subsequent gains came after Nvidia Corp. issued a bullish forecast of its own, cementing how AI remains a powerful growth tailwind and a theme that investors can’t get enough of. 

The rally has resulted in a hefty multiple. Arm is priced at 36.5 times revenue projected over the next 12 months, making it far more expensive than any component of the Nasdaq 100 Index. Nvidia, in contrast, is priced below 18 times forward sales.

(Updates with closing prices throughout.)

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