S&P 500 may face selling pressure as systematic funds reach full exposure
Investing.com -- Palantir Technologies Inc (NASDAQ:PLTR) stock plummeted sharply again Thursday following news that CEO Alex Karp had adopted a new stock trading plan, along with a report that the Pentagon has been directed to prepare for annual defense budget cuts of 8% over the next five years.
The stock tumbled another 10% on Thursday after falling 10% on Wednesday as news of the potential cuts were first leaked.
The company, widely recognized for its defense-related software and technology services, disclosed in a regulatory filing on Tuesday night that Karp’s new trading plan allows him to sell nearly 10 million shares over the next six months.
A day later, The Washington Post reported that Defense Secretary Pete Hegseth has instructed top Pentagon officials and military leaders to draft plans for significant reductions to the defense budget, which currently stands at approximately $850 billion. According to the report, Hegseth set a Monday deadline for the proposed cuts.
Before the sharp decline, Palantir had been one of the strongest-performing US stocks over the past two years, climbing nearly 50% so far this year.
The company currently trades at a price-to-earnings (P/E) ratio of nearly 500. Serving as a valuation gauge, the ratio measures a company’s stock price relative to its earnings per share (EPS), indicating how much investors are willing to pay for each dollar of earnings.
The defense budget cut comes as part of the Trump administration’s aggressive strategy to reduce government spending and shrink the federal workforce since President Donald Trump was sworn in for a second nonconsecutive term on January 20.
As part of that effort, Trump appointed Tesla (NASDAQ:TSLA) CEO Elon Musk to lead the newly created “Department of Government Efficiency,” known as DOGE. Both Musk and Trump have faced criticism over their approach, with some of their measures being successfully challenged in federal court.
Wedbush analyst Dan Ives came out to defend the stock following the sell-off, calling the worries "noise".
"Palantir is helping lead the AI Revolution into the use case phase as its AIP product moat is unmatched in our view. Karp & Co. are playing chess in the AI Arms Race while others play checkers and the bears continue to miss this generational tech story as they cannot find AI in their spreadsheets when in their hibernation caves," Ives stated. "Palantir remains one of our top names to own in 2025 and we believe this sell-off represents another opportunity with PLTR generating traction across both federal and commercial for its entire portfolio." The analyst thinks Palantir could be come a trillion dollar market cap company in the coming years.
(Vahid Karaahmetovic contributed to this report)