Palantir Technologies Stock Crashed (Again) on Thursday: Pentagon Budget Cuts and CEO's New Trading Plan Spark Selling Pressure

Palantir Technologies (PLTR) stock experienced another significant drop on Thursday, February 20, 2025, as investors reacted to news of potential Pentagon budget cuts and CEO Alex Karp's new stock trading plan. The stock opened at $123.86 but plummeted to a low of $108.56 before recovering slightly to $112.06. This crash can be attributed to two primary factors: a Washington Post report on Pentagon budget cuts and Karp's new stock trading plan.

The Washington Post reported that Defense Secretary Pete Hegseth has directed top Pentagon brass to prepare for an 8% annual defense budget cut in each of the next five years. This reduction would significantly impact military contractors like Palantir, which generates substantial revenue from U.S. government contracts. According to Palantir's 2024 annual report, its top three government clients account for 17% of its total revenue, and these clients are under the Department of Defense. Therefore, this budget cut would significantly impact their revenue, causing selling pressure on the PLTR stock and a 13% price drop.

Additionally, Palantir Technologies CEO Alex Karp recently adopted a new stock trading plan, which allows him to sell 10 million shares in the next eight months. Although the previous plan had even bigger sales, the revelation of this new plan around the budget cut exaggerated the market's reaction. Investors feared that Karp's selling could indicate a lack of confidence in the company's future prospects, further exacerbating the selling pressure on the PLTR stock.

Palantir's stock price has been volatile in recent months, with the company facing challenges such as the potential Pentagon budget cuts and concerns about its valuation. The PLTR stock's exponential price rally in 2024 brought everyone's attention to this stock, with over 70% of companies having a lower mix of growth, profitability, debt, and visibility. However, some analysts anticipate a slow to 22% year-over-year growth over the next two years, much less than the holders' expectations. The company's P/E (price-to-earnings) ratio is 594.20, showing investors' aggressive growth expectations. Despite these concerns, Palantir stock is among the top-performing stocks in the AI sector, and some analysts believe it could benefit from government AI investments and cost-cutting initiatives.



In conclusion, Palantir Technologies' stock price crash on Thursday was primarily driven by two factors: a Washington Post report on potential Pentagon budget cuts and CEO Alex Karp's new stock trading plan. Investors reacted to these news items, causing selling pressure on the PLTR stock. Despite the company's strong fundamentals and growth prospects, investors remain concerned about its valuation and reliance on government contracts. As the situation unfolds, investors should closely monitor Palantir's financial performance and market reactions to make informed decisions about their investments.