Palantir Stock Plummets on Pentagon Budget Cut Proposal
Palantir Technologies (PLTR) shares plunged by over 10% on Wednesday after the Washington Post reported the Trump administration's plan to impose significant budget cuts on the Pentagon.
According to the report, Defense Secretary Pete Hegseth has instructed senior military leaders to implement an 8% annual reduction in the defense budget over the next five years. This could potentially result in tens of billions of dollars in cuts.
Palantir, a provider of AI software used for surveillance by the US government, derives a substantial portion of its revenue from defense contracts. The company's stock has been on an upward trend in 2025, but Wednesday's decline erased recent gains.
The Washington Post report indicates that certain categories, including border operations and munitions acquisitions, would be exempt from the cuts. However, Palantir's potential exposure to the proposed budget reductions has weighed heavily on investor sentiment.
The Financial Times previously reported that Palantir is exploring forming a consortium with competitors such as Anduril to bid for government contracts. However, the budget cut proposal adds uncertainty to Palantir's revenue outlook.
As of February 19, 2025, Palantir's stock closed at $112.06, down 10.08% for the day. Despite the decline, the company remains one of the top performers in the S&P 500 index, with a year-to-date gain of over 48%.