Jefferies downgraded Palantir (PLTR) stock to "Underperform" from a "Hold" rating, while slashing its price target to $13 per share from $18. Jefferies Analyst Brent Thill writes that Palantir still has a long-term AI advantage through the trends of "AI euphoria."

Yahoo Finance Live's Josh Lipton and Julie Hyman discuss Palantir's growth in 2023 as it balances its commercial and government enterprises.

To hear from Brent Thill of Jefferies on his Palantir downgrade, click here. You can hear more from Dan Ives here.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

JOSH LIPTON: Shares of Palantir taking a hit today after Jefferies downgrades that name and saying the AI hype around the company is overblown. Their analyst, Brent Thill, told Yahoo Finance today that although the company still has an AI advantage in the long term, its valuation has become unsustainable.

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BRENT THILL: We are huge fans of what's going to happen due to AI. But again, as we said that the hype is ahead of the reality. And we think, again, the stock, given the magnitude of the outperformance last year, we simply just like other names in software, like monday.com, Microsoft, there's a handful of others that we like better.

JOSH LIPTON: So a new Palantir bear here. Brent Thill over at Jefferies says, yes, he says-- I mean, it's interesting, you read the note, he's still a fan of the company. I think it's partly the run he's saying here. He just thinks they have an AI technology advantage in the long term. He's saying he's concerned that the stock is just rally to these unsustainable valuation levels on the back of, what he says, is AI euphoria. And also, by the way, he mentions retail trading momentum. And yes, this stock has been an absolute monster, ripped over the past 12 months.

JULIE HYMAN: I mean, let's take a step back here. If you're looking at 2024 and you're saying to yourself, I want to play AI, how am I going to do it? Let's say, you have no position. He's saying there are better places to go. If you're in the stock already, he's saying we like it long term. And by the way, another person he really likes it now, long term, he's one who's prone to big statements, and that's Dan Ives over at Wedbush. We just spoke to him yesterday. And he said Palantir is the best pure play for AI.

DAN IVES: Everyone focus on government, what they've done there, maybe some of the controversies. The reality is that they've leveraged that government expertise into enterprise. You could--