Palantir Stock Plunges on News of Defense Budget Cuts
Palantir's (PLTR) stock experienced a significant decline following a report from The Washington Post claiming that the Trump administration has instructed the Pentagon to anticipate substantial budget reductions over the next five years.
On Wednesday, shares plunged by 10%, losing ground rapidly towards the end of the trading session and continuing to decline by over 5% in early trading on Thursday. According to The Washington Post, Defense Secretary Pete Hegseth has issued a memo to top officials within the Pentagon and the US military, mandating an 8% annual reduction in the defense budget over the next five years, potentially amounting to tens of billions of dollars in cuts.
"Our budget will fund the necessary fighting force, eliminate unnecessary defense spending, reduce excessive bureaucracy, and drive actionable reform, including progress on the audit," Hegseth stated in the memo, which was obtained by The Post.
Reportedly, approximately 17 categories will be exempt from the cuts, including US border operations and munitions acquisitions. Palantir did not provide an immediate response to Yahoo Finance's request for comment.
Palantir offers AI software utilized for surveillance purposes by the US government. In its most recent quarterly financial report, over half of the company's revenue originated from global government contracts, with the US Department of Defense accounting for a substantial portion.
In December, The Financial Times reported that Palantir is engaged in discussions with competitors such as Anduril to form a consortium with the aim of securing US government contracts.
Despite Wednesday's setback, Palantir stock has experienced a strong performance in 2025, rising by more than 48% year-to-date and currently ranking as the second-best performing stock in the S&P 500. Over the past year, the stock has gained over 350%.