The AI superstar stock, Palantir (PLTR.US), has experienced a significant drop in its stock price due to the CEO's share sale plan and the Pentagon's budget cut, triggering a wave of selling.

PALANTIR shares fell more than 12% during Wednesday's trading session in the U.S. after news that CEO Alex Karp had adopted a new stock trading plan and reports that the U.S. Department of Defense had been ordered to prepare for a 8% annual cut in the U.S. defense budget over the next five years. PALANTIR is best known for its contract work, providing software and technology services to defense agencies. The company disclosed in a regulatory filing Tuesday night that Karp's new plan would allow him to sell nearly 10 million shares of the company's stock over the next six months. The report Wednesday said Defense Secretary Pete Hegseth had ordered senior Pentagon leaders and other top military officials to develop plans to dramatically cut the defense budget over the next five years. The current fiscal year's budget is about $850 billion. Hegseth reportedly asked for the proposed cuts to be developed by next Monday. PALANTIR shares closed Wednesday at $112.06, down 10% from the previous trading day. Shares fell more than 4% in after-hours trading. The company's market value is now more than $260 billion, and its fourth-quarter 2024 revenue was $828 million, with adjusted earnings per share of 14 cents, according to a February report. The big data analytics software giant, which has been dubbed "the AI big stock," was one of the best-performing stocks in the U.S. over the past two years, rising nearly 50% this year on the strength of robust AI demand. PALANTIR's current price-to-earnings ratio is near 600. Since Jan. 20, when Trump took office as president for a second time, the Trump administration has been engaged in a broad effort to cut government spending and the number of federal government workers. Trump appointed Tesla CEO Elon Musk to head the effort, which is called the "Department of Government Efficiency" (DOGE). Musk and Trump have been criticized for their methods of achieving DOGE's goals, with some of the initiatives even successfully blocked in federal court. But on Tuesday, Karp defended Musk in an interview. "Progressives should say, 'OK, Elon, you're clearly the most qualified person in the world to do this. We want to have a conversation about what you're doing and how you're doing it,' " Karp said. "I don't believe that's happened," he added.