Palantir Technologies (NASDAQ: PLTR) shares plunged over 8% on Monday, extending a steep 25% decline over the past four days. Investors dumped the stock amid the growing fears of Pentagon budget cuts that could slam the company’s revenue.
The latest tumble stems from reports that the U.S. Defense Secretary plans to trim military spending by 8% over the next five years. That’s bad news for Palantir, a data-analysis software firm that leans heavily on government contracts. In 2024, over 40% of the company’s revenue came from federal clients, with the U.S. Army alone making up 22% of its government business. Any rollback in defense spending could deliver a direct blow to Palantir’s bottom line.
The company has been riding high on the artificial intelligence wave, with its stock surging over 300% in the past year. That growth has made Palantir a darling of the AI boom, but its reliance on government cash now casts a shadow. Currently trading at a lofty 170 times estimated earnings, the stock’s premium valuation leaves little room for error as budget concerns mount.
Still, some analysts aren’t ready to write Palantir Technologies (NASDAQ: PLTR) off. Just last week, Wedbush analyst Dan Ives stood by the stock, saying, “Palantir remains one of our top names to own in 2025.” He views the sell-off as a chance for investors to buy in, highlighting Palantir’s strong momentum in both government and commercial sectors. “The company’s entire portfolio is gaining traction,” Ives noted.
The market now awaits more clarity on the proposed Pentagon cuts. The Defense Secretary has set February 24 as the deadline for input on the plan. Whatever comes next could shape Palantir’s future and the larger defense contracting landscape. Investors are holding their breath for answers.
Despite the recent volatility, Palantir remains a standout performer in the Nasdaq 100 Index, posting a 20% gain this year. The company’s aggressive growth forecasts and its foothold in the AI sector offer hope that it can weather the storm. Some also see a silver lining: the military’s focus on efficiency and technology could boost spending on AI solutions—exactly where Palantir shines.
For now, the stock’s long-term fans point to its Pentagon ties as a source of strength. They argue that Palantir’s role in driving military innovation could keep it in the game, even if budgets tighten. But with uncertainty swirling, the road ahead looks bumpy.
