Palantir Stock Slumps on News of Pentagon Budget Cuts
Palantir Technologies (PLTR) shares plunged after a Washington Post report revealed the Trump administration's plans to impose significant budget cuts on the Pentagon over the next five years.
PLTR stock tumbled over 10% on Wednesday, losing ground rapidly in the final hour of trading. The decline continued into Thursday, with shares dropping over 5% in early trading.
The Washington Post reported that Defense Secretary Pete Hegseth has instructed Pentagon leaders to reduce the defense budget by 8% annually for the next five years, amounting to potential cuts of tens of billions of dollars.
"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," Hegseth reportedly wrote in a memo obtained by the Post.
The Post noted that around 17 categories, including border operations and munitions acquisitions, will be exempt from the cuts. Palantir, which provides AI software used by the US government for surveillance, did not immediately respond to a request for comment.
Over 50% of Palantir's recent revenue stems from government contracts, particularly from the US Department of Defense. The company is also reportedly exploring a consortium with competitors to bid for government contracts.
Despite Wednesday's drop, PLTR stock has surged over 48% year-to-date, making it the second-best performer in the S&P 500. Over the past 12 months, the stock has gained over 350%.