There’s no denying that Palantir Technologies (NYSE:PLTR) caught the attention of financial traders in May and June. That’s probably because of the company’s connection to artificial intelligence, a red-hot topic in 2023. This helps to explain why some analysts might be optimistic about PLTR stock.

On the other hand, Palantir Technologies’ rich valuation indicates that this might not be the right time to take a share position.

Colorado-headquartered Palantir Technologies isn’t specifically an AI company. However, Palantir provides security products and services that often utilize machine learning.

Moreover, as we’ll discuss in a moment, one analyst group pointed out the link between Palantir Technologies and generative AI. Some experts on Wall Street seemed to suggest that cautious traders shouldn’t be too hasty to invest in Palantir now.

Palantir Technologies Captures AI Opportunity

So, what’s the connection between Palantir Technologies and generative AI?

Analysts with Bank of America explained Palantir is positioned to be a dominant player in generative AI “by providing a near term solution, agnostic to a preferred LLM (large language model), compliant to tight security, data privacy and regulatory requirements, with demonstrated use cases across sectors.”

Fair enough, and now we can understand why the Bank of America analysts raised their price target on PLTR stock from $13 to $18. Yet, Palantir Technologies’ link to the generative AI industry isn’t a secret. Surely by now, it’s a known factor that’s been priced into the shares.

Even the bullish Bank of America analysts seemed to acknowledge this. They observed that the “speed and magnitude of the stock appreciation for AI-related companies has started to raise market concerns about a bubble.” Are Palantir Technologies’ shareholders facing the prospect of a pullback, then?

PLTR Stock Looks Due for a Pullback

It’s possible that some “bubble trouble” may be brewing for folks who dare to invest in Palantir Technologies at the current share price. Indeed, there’s at least one analyst group that’s evidently concerned about financial traders’ enthusiasm for Palantir.

As The Fly reported, Raymond James analysts downgraded PLTR stock from “strong buy” to “outperform.” Now, you might be surprised to see an analyst group downgrading Palantir Technologies shares.

However, the general consensus rating among prominent analysts is that Palantir shares are a “hold” with an average price target of $11.13. This implies substantial downside from the current stock price.

As for the Raymond James analysts, they cited the outsized share-price appreciation that occurred after Palantir Technologies reported its quarterly earnings. Of course, Palantir Technologies CEO Alexander C. Karp made sure to mention the company’s “new Artificial Intelligence Platform (AIP)” in Palantir’s most recently released quarterly earnings report.

Hendi Susanto, a portfolio manager at Gabelli Funds, has a warning for overeager investors. Susanto feels it’s “too early to have conviction on whether” Palantir Technologies’ “AI roadmap will enable it to reach wider adoption.”

Susanto cautions that some investors “may have gotten detached from fundamentals and ahead of themselves.”

Relax and Be Patient With PLTR Stock

Don’t get the wrong idea here. It’s fine to be bullish about Palantir Technologies’ connection to generative AI. However, financial traders should be on the lookout for “bubble trouble.”

After all, being a price chaser can have unfortunate consequences. So, if you’re considering an investment in Palantir Technologies, just be patient.

Timing is everything in the world of stock trading. Let PLTR stock pull back to a less bubble-icious price, such as $12. Then, you can take a confident share position in Palantir Technologies without being a price chaser.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.