Shares of Palantir Technologies Inc. (NASDAQ: PLTR) took another hit on Thursday, initially dropping sharply before recovering some losses. The palantir stock declines follows news that CEO Alex Karp has implemented a new stock trading plan and reports indicating that the Pentagon is preparing for significant annual defense budget reductions.
The stock was down 4.7% at its last trade on Thursday after plunging as much as 14.5% earlier in the session. This latest dip comes on the heels of a 10% sell-off on Wednesday, triggered by early reports of potential defense spending cuts.
Palantir, known for its data analytics software and extensive work with defense agencies, revealed in a regulatory filing on Tuesday night that Karp’s new trading plan enables him to sell nearly 10 million shares over the next six months. The timing of this disclosure coincided with The Washington Post’s report that Defense Secretary Pete Hegseth has instructed military leaders to prepare proposals for scaling back the defense budget, which currently stands at about $850 billion. According to the report, officials have until Monday to submit their budget reduction strategies.
Before this recent downturn, Palantir had been one of the top-performing U.S. stocks over the past two years, gaining almost 50% year-to-date. The company is currently valued at a price-to-earnings (P/E) ratio close to 500, reflecting high investor expectations despite concerns over potential revenue impacts from government spending cuts.
The defense budget reduction aligns with the Trump administration’s broader push to curb government spending and restructure federal operations following Donald Trump’s return to office on January 20 for a second nonconsecutive term. As part of this initiative, Tesla (NASDAQ: TSLA) CEO Elon Musk was appointed to lead the newly established “Department of Government Efficiency” (DOGE). Both Musk and Trump have faced legal challenges over some of their proposed cost-cutting measures.
Despite investor concerns, Wedbush analyst Dan Ives remains optimistic about Palantir’s future, dismissing the recent stock drop as temporary market “noise.” He emphasized that Palantir is a leader in AI-driven technology and its Artificial Intelligence Platform (AIP) remains a key competitive advantage. Ives believes the company is strategically positioned for long-term success, projecting that Palantir has the potential to reach a trillion-dollar market cap in the future.
While uncertainty surrounding government spending may weigh on the palantir stock declines in the short term, many analysts see Palantir’s AI and commercial expansion as a strong driver of future growth.
