Palantir Inc. (PLTR) Drops 3.06% Amid Government Spending Cuts

Palantir Inc. (PLTR) experienced a 3.06% drop in pre-market trading on April 2, 2025, amidst a challenging environment for the company.

Palantir, led by Alex Karp, has faced significant headwinds recently. The company's stock has declined nearly 33% since mid-February, losing $90 billion in market capitalization. This downturn is largely attributed to the U.S. Federal Government's efficiency drive, which aims to cut unnecessary expenses. The DOGE initiative, spearheaded by Elon Musk, has uncovered thousands of unused software licenses within the government, and the Department of Defense has canceled contracts with Oracle Corp. due to delays and cost overruns. While Palantir has not been directly impacted, the government's stance on wasteful expenses is clear.

Adding to these concerns, Goldman Sachs Group Inc. analyst Gabriela Borges reiterated her 'Neutral' stance on the stock, citing valuation concerns and uncertainties regarding its long-term competitive edge. Borges felt that Palantir's competitive advantages could erode quickly as AI continues to advance, making its valuation of nearly 450 times earnings unwarranted. However, other analysts, such as Wedbush, have spoken out in favor of the company, citing long-term tailwinds from DOGE and the broader pursuit of governmental efficiencies. Wedbush analysts suggested that Palantir could gain more deals and IT budget dollars across various government agencies.

With 40% of its revenues coming from government contracts, Palantir is poised to experience headwinds in the near term. The last time the U.S. government balanced the budget was in the early 2010s during the sequestration, when IT stocks with exposure to the government saw their valuations evaporate. Palantir could experience a similar scenario, not because it doesn’t add value, but because its valuations are too high to justify any volatility in earnings.