Palantir Technologies Faces Stock Decline Amid Defense Budget Cut Concerns
Palantir Technologies Inc. (PLTR) experienced a significant stock decline following reports of potential defense budget cuts under the Trump administration. The stock fell more than 5% on Thursday, adding to a 10% drop the previous day, after The Washington Post reported that Defense Secretary Pete Hegseth instructed the Pentagon to prepare for annual 8% budget reductions over the next five years. These cuts could amount to tens of billions of dollars, raising concerns about the impact on Palantir, which derives more than half of its revenue from government contracts, particularly with the U.S. Department of Defense.
Despite the selloff, Wedbush analyst Dan Ives defended Palantir’s position, stating that the company’s unique software approach could help it secure more budget dollars rather than fewer. He emphasized that Palantir is well-positioned to thrive in a disciplined spending environment, potentially gaining a larger role in government efficiency initiatives. The company’s AI-driven platforms, such as Palantir Gotham and Foundry, are integral to its operations, with recent growth driven by its Artificial Intelligence Platform (AIP).
Palantir’s stock had been on a strong upward trajectory in 2025, rising over 48% year-to-date before the recent downturn. The company has also been in talks with competitors like Anduril to form a consortium for bidding on U.S. government contracts, further solidifying its role in the defense and AI sectors. However, the stock’s high valuation, trading at 198 times forward earnings, has raised concerns among some analysts, who caution that retail investor enthusiasm may not be sustainable in the long term.
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