Palantir Stock Falls Amid Defense Budget Cut Concerns
Palantir Technologies (PLTR) shares plummeted 10% for a second consecutive day on Thursday, extending Wednesday's 10% decline. The recent selloff stems from a Washington Post report indicating that the Trump administration has instructed the Pentagon to prepare for significant budget cuts over the next five years.
The Post reported that Defense Secretary Pete Hegseth issued a memo mandating an 8% annual reduction in the defense budget. This could potentially translate into tens of billions of dollars in savings. Notably, Hegseth emphasized the need to prioritize essential fighting capabilities, eliminate unnecessary spending, and streamline bureaucracy.
Palantir, which provides AI-powered surveillance software to the US government, has been heavily impacted by the budget cut concerns. Over half of the company's revenue is generated from global government contracts, primarily the US Department of Defense.
Despite the sell-off, Wedbush analyst Dan Ives remains optimistic about Palantir's prospects amid the potential budget cuts. Ives highlighted the uniqueness of Palantir's software approach, which he believes will enable the company to secure additional funding from the Pentagon.
Furthermore, Palantir is reportedly exploring a consortium with competitors like Anduril to bid for US government contracts. This strategic move could bolster the company's position in the market.
In 2025, Palantir's stock has experienced a notable surge, rising over 48% year-to-date. This performance makes it the second-best-performing stock in the S&P 500. Over the past year, the stock has gained over 300%.