Palantir Stock Plummets as Pentagon Faces Budget Cuts
Palantir Technologies (PLTR) experienced a significant 10% decline on Wednesday after news emerged that the Trump administration plans to impose substantial budget cuts within the Pentagon over the next five years. The Washington Post reported on a memo from Defense Secretary Pete Hegseth to senior Pentagon and military leaders, outlining plans to reduce the defense budget by 8% annually for the next five years. This equates to potential cuts in the tens of billions of dollars.
According to the memo obtained by the Post, "Our budget will resource the fighting force we need, cease unnecessary defense spending, reject excessive bureaucracy, and drive actionable reform including progress on the audit." The Post also indicated that 17 categories, including US border operations and munitions acquisitions, would be exempt from the cuts.
Palantir did not provide an immediate response to Yahoo Finance's request for comment. As a provider of AI software used by the US government for surveillance, Palantir relies heavily on government contracts for revenue. Over half of the company's revenue during its most recent quarterly earnings report was attributed to global government contracts, with the US Department of Defense being a major contributor.
Despite Wednesday's decline, Palantir stock has witnessed a significant rally in 2025, surpassing 48% year-to-date. It currently ranks as the second-best performing stock in the S&P 500. Over the past year, the stock has gained over 350%.