Palantir Stock Falls Nearly 4% In Thursday Pre-Market: What's Going On?

Palantir Technologies Inc. PLTR stock dropped 3.7% in the pre-market trading session on Thursday amid the Pentagon budget cut plan and the CEO’s stock sale plan.

What Happened: The shares of Palantir, the surveillance and defense software company, witnessed a decline since Wednesday’s trading session. This drop in stock price was triggered by the news of CEO Alex Karp‘s new stock trading plan, 10b5-1, enabling him to sell up to 9.98 million shares by Sep. 12, worth almost $1.23 billion at current prices.

Adding to the company’s troubles, the U.S. Defense Secretary, Pete Hegseth reportedly directed plans to slash the defense budget by 8% annually over the next five years. However, the budget cut memo details 17 categories that the Donald Trump administration aims to exempt from the cuts, such as the US-Mexico border operations, the modernization of nuclear weapons and missile defense, as well as the procurement of one-way attack drones and other munitions.

The current fiscal year’s budget stands at approximately $850 billion.

Palantir’s shares closed at $112.06 on Wednesday, marking more than a 10% drop. The company’s shares continued to fall in after-hours trading, with a further decline of more than 5%.

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Why It Matters: Despite the recent downturn, Palantir has been one of the top-performing U.S. stocks over the past two years, with a nearly 50% increase in share price year-to-date before Wednesday’s drop. The company relies heavily on government defense contracts and derived 55% of its revenue in 2024 from this segment. Hence, the potential defense budget cuts and Karp’s new stock trading plan have rattled investors, causing a sharp reversal in the company’s stock performance. 

However, in a post on X, Dan Ives from Wedbush Securities stated that this was “not a headwind,” for the stock and that the company could benefit as the DOGE pushes for more efficiency in the defense sector. Meanwhile, CNBC's Jim Cramer called on investors to "support the stock."

In another development on Wednesday, Palantir announced a multi-year strategic partnership with SAUR Group, aiming to transform contract management processes using Palantir Foundry's advanced Generative AI capabilities.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.