Palantir Stock Plunges 10% on News of Pentagon Budget Cuts
Palantir Technologies (PLTR) shares witnessed a significant decline of 10% on Wednesday, primarily driven by a Washington Post report indicating that the Trump administration has instructed the Pentagon to implement substantial budget cuts over the next five years.
The report stated that Defense Secretary Pete Hegseth issued a memo to senior Pentagon and military leaders outlining the plan for 8% annual cuts in the defense budget, potentially amounting to billions of dollars in reductions.
Palantir, a provider of AI software utilized for surveillance by the US government, heavily relies on government contracts for its revenue. Over half of the company's earnings in its recent quarterly report originated from such contracts, with the US Department of Defense being a major contributor.
The Financial Times reported in December that Palantir is exploring forming a consortium with competitors like Anduril to bid for US government contracts.
Despite Wednesday's sell-off, Palantir shares have performed exceptionally well in 2025, climbing over 48% year-to-date. Currently, it ranks as the second-best performer in the S&P 500 and has witnessed a remarkable increase of over 350% in the past year.