Nvidia is down 23% in 2022, but do metaverse prospects make it a buy?
Nvidiaâs stock has fallen significantly since the beginning of the year, weighed down by valuation worries and concerns about its troubled ARM purchase. But has this slide led to a buying opportunity, given the company's prospects in the hot metaverse space? 
Nvidia Falls as ARM Merger Languishes
Nvidiaâs (NASDAQ:NVDA) stock has tumbled 23% since the first of the year but is still up 74% compared to the same time last year, thanks to a massive appreciation during 2021. In comparison, the S&P 500 has dropped 8% year-to-date but has risen 16% over the past 12 months.
The sell-off in shares has come amid reports that the graphics and automotive chipmaker was abandoning its $40B bid for U.K.-based chip designer Arm. The deal has faced significant resistance by global antitrust regulators.
In a note released earlier this week, BofA Securities said it believed Nvidia was better off walking away from the deal, which it saw as dilutive and complicated.
"All in, we believe NVDA could redirect the cash/equity towards other growth endeavors in AI, Metaverse, game, autos and enterprise AI," wrote the BoA analysts, who rated the stock a buy with a price target of $375.
Enderle Group also weighed in on the deal.
"ARM is a licensing entity and certainly is free to partner with NVIDIA without restriction, but getting the approvals to buy ARM would have likely placed massive restrictions on the combined company. It may have forced NVIDIA to divest part of what they now have," said Enderle in its note.
Is NVIDIA a Buy?
Wall Street analysts are largely bullish on the stock. Of the 42 analysts tracked by SA over the past 90 days, the average rating was buy, with 27 rating the stock a strong buy. The average price target was $335.41. 
With NVDA currently trading around $239, the average price target would represent an advance of about 40% from current levels. The stock had reached a 52-week high of $346.47 last November.
SAâs authors, meanwhile, have rated the stock a hold, on average. SAâs Quant Ratings also give the stock a hold, largely due to NVDA's valuation, which earned an F. The companyâs profitability and momentum, however, both garnered an A+.
Some analysts have been particularly bullish on Nvidiaâs Omniverse initiative, which the company has promoted as a platform that enables other companies to build their own metaverses. The companyâs chief executive officer, Jensen Huang, has described Omniverse as bringing together the companyâs expertise in artificial intelligence, simulation, graphics and infrastructure to allow companies to create digital entities such as customer service, avatars and virtual twins of factories.
In a bullish report, SA contributor JR Research recently noted that some analysts have viewed Omniverse as a $100B market opportunity and that the recent sell-off has âbrought NVIDIA stock back into its fair-value zone.â
For a more bearish take on the stock, see SA contributor Oleh Kombaievâs analysis on Nvidiaâs stock, which he still views as overvalued.