Palantir Stock Tumbles Following CEO’s Trading Plan and Potential Defense Budget Cuts

The technology firm, renowned for its software solutions and services catered primarily to defense agencies, saw its shares decrease following dual developments that could impact its future contracts and financial stability.

On Tuesday, a regulatory filing revealed that Karp has arranged a trading plan allowing for the sale of nearly 10 million shares of his company stock within the next six months. This disclosure coincided with a report from The Washington Post stating that Defense Secretary Pete Hegseth has been tasked with planning significant budget cuts for the Pentagon, potentially decreasing its current $850 billion budget in a bid to manage government expenditure more efficiently.

This news of financial tightening aligns with broader efforts under the Trump administration, which has actively sought to reduce government spending and the federal workforce. These measures include appointing Tesla CEO Elon Musk to lead the newly formed Department of Government Efficiency, aiming to overhaul federal fiscal management.

The market responded swiftly to these announcements, with Palantir’s stock closing at $112.06 per share on Wednesday, marking a 10% decrease. The after-hours trading saw an additional decline of over 1.5%.

Despite these challenges, Palantir reported a robust performance in the fourth quarter of 2024, with revenues reaching $828 million and adjusted earnings per share at 14 cents. Prior to Wednesday’s drop, the company had been performing exceptionally well, with its stock price increasing nearly 50% since the beginning of the year, supported by a soaring price-to-earnings ratio of nearly 600-to-1.

During an interview on CNBC’s “Squawk Box,” Karp defended Elon Musk’s involvement in government efficiency efforts, urging the progressive left to engage more constructively with Musk’s initiatives. Karp emphasized the need for dialogue and collaboration, highlighting the potential benefits of Musk’s leadership in streamlining government operations.

As Palantir navigates through these financial and operational challenges, the market and investors will closely watch how these strategic changes impact its long-term growth and position in the defense technology sector.