Palantir Technologies Inc. PLTR shares tumbled over 5% on Wednesday in after-hours trading following reports of potential Pentagon budget cuts and CEO Alex Karp‘s new stock trading plan rattled investors, marking a sharp reversal for one of the market’s top performers.
What Happened: The data analytics company’s stock closed at $112.06 after Defense Secretary Pete Hegseth reportedly ordered Pentagon leaders to prepare plans for 8% annual budget cuts over the next five years. The current defense budget stands at approximately $850 billion.
The sell-off intensified following Palantir’s disclosure to the U.S. Securities and Exchange Commission that CEO Karp adopted a new Rule 10b5-1 trading plan, allowing him to sell up to 9.98 million shares by Sep. 12, potentially worth $1.23 billion at current prices. The plan replaces a previous larger selling arrangement.
CNBC’s Jim Cramer attempted to rally support amid the decline, calling on “Palanteers” via social media to “support the stock right now.” The company, valued at over $255 billion, has seen its shares surge 65% year-to-date and 410% over the past year, driven by strong demand for its AI platforms Gotham and Foundry.
Why It Matters: The proposed defense cuts come as part of the President Donald Trump administration’s broader initiative to reduce government spending, led by newly appointed Tesla Inc. CEO Elon Musk through the “Department of Government Efficiency.”
Karp, who co-founded Palantir with Peter Thiel, publicly defended Musk’s appointment on Tuesday, suggesting progressives should engage in dialogue with Musk given his qualifications.
Despite the stock’s recent volatility, Palantir reported strong fourth-quarter 2024 results, with revenue reaching $828 million and adjusted earnings of 14 cents per share. However, the company’s elevated price-to-earnings ratio is at 594.
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