Palantir’s stock price dropped more than 5% on Thursday, following a report by The Washington Post that suggested the Trump administration plans to reduce the defense budget over the next five years. The proposed cuts could affect Palantir’s revenue, which is heavily reliant on contracts with the US Department of Defense.
The report stated that Defense Secretary Pete Hegseth has instructed senior Pentagon officials to cut 8% from the defense budget each year for the next five years, potentially leading to tens of billions of dollars in reductions. However, some categories would be exempt from these cuts, including border operations and munitions acquisitions.
Palantir’s AI software is used by the US government for surveillance purposes, with more than half of its revenue coming from global government contracts. Despite this, Wedbush analyst Dan Ives defended Palantir’s prospects, saying that the company’s unique approach will allow it to gain more budget dollars at the Pentagon.
Ives predicted that Palantir would benefit from a “disciplined spending environment” and that the proposed cuts would ultimately be a positive growth catalyst. He also mentioned that Palantir is in talks with competitors to form a consortium to bid for US government contracts, which could help mitigate the impact of the budget cuts.
The stock has experienced significant growth in 2025, rising over 48% year-to-date and outperforming the S&P 500 second-best-performing stock.
Source: https://finance.yahoo.com/news/palantir-stock-sinks-after-report-trump-administration-is-eyeing-large-defense-budget-cuts-145619504.html