Palantir Stock Plunges 13% on Trump's Defense Cuts and CEO's Sell-Off Plans

Palantir Technologies (PLTR) stock took a nosedive on Wednesday, plummeting 13% after reports of potential defense budget cuts under the Trump administration and the announcement of CEO Alex Karp's plans to sell nearly 10 million shares over the next six months. The company's shares had been on a meteoric rise, surging nearly 50% year-to-date before the sudden drop.

The Washington Post reported that Defense Secretary Pete Hegseth ordered an 8% annual cut to the U.S. defense budget for the next five years. This news could negatively impact military contractors like Palantir, which derives more than 40% of its revenue from the U.S. government. The proposed cuts, driven by Elon Musk's "Department of Government Efficiency" initiative, have already sparked legal challenges.

Palantir's stock price dropped 10% to close at $112.06 Wednesday after closing at an all-time high Tuesday and setting an intraday record at $125.41 earlier in the session. Shares of some other firms that service the U.S. military, including Northrop Grumman (NOC), Booz Allen Hamilton (BAH), and L3 Harris (LHX), also lost ground Wednesday.



Separately, Palantir disclosed late Tuesday that CEO Alex Karp adopted a new trading plan to sell up to 9.98 million shares through Sept. 12. While routine for executives, the sheer volume of planned sales raised eyebrows. Karp's move follows a meteoric rise in Palantir's stock, which had surged nearly 50% year-to-date before Wednesday's drop. Palantir's current price-to-earnings ratio of nearly 600-to-1 suggests the stock is priced for perfection—leaving little room for nerves.

Palantir bulls aren't out of the game, but the battlefield just got a lot trickier. The company's stock trades at $100, below its eight-day simple moving average (SMA) of $115.05 – a bearish signal. However, it's still above the 20, 50, and 200-day SMAs, flashing multiple bullish signals. The Relative Strength Index (RSI) sits at 52.07, nearing overbought territory, while the Moving Average Convergence/Divergence (MACD) indicator remains bullish at 10.16.

Investors should closely monitor the situation and consider the potential impact of defense budget cuts and the CEO's sell-off plans on Palantir's future prospects. While the company's high forward price-to-earnings ratio of 158 may suggest that the stock is overvalued, there are fundamental factors that could justify its current valuation, such as its growth potential, AI and big data expertise, government contracts, and expansion into new markets. However, investors should remain cautious and consider the risks associated with the company's exposure to defense spending and the potential impact of the CEO's share sale plan on investor confidence.