UPDATE: Bank Of America Downgrades NVIDIA

In a note released early Thursday morning, Bank of America analyst Adam Gonzalez downgraded shares of NVIDIA NVDA from Neutral to Underperform and maintained a price target.

As reasons for the downgrade, Gonzalez cited "very modest" sales growth of three to four percent  down from nine percent for 2015 and 2016, a 55 percent peak in gross margin and 15 percent in operating margin, and a "stretch valuation."

Gonzalez wrote, "While Nvidia is doing well in enterprise graphics, the consumer side has peaked, with gaming growth offset by mainstream PC declines... Nvidia derives ~30% of its EPS from fixed quarterly royalty payments from Intel and there is considerable investor debate on whether these will be renewed beyond their early 2017 expiration date."

Following the downgrade, shares of NVIDIA have dropped as much as three percent in Thursday's pre-market session.