Political Favoritism and the Shadow of the Revolving Door: Assessing Risks in Defense Contracting

In the high-stakes arena of defense contracting, the line between corporate influence and public policy has grown increasingly blurred. Over the past five years, companies like Palantir Technologies and Salesforce have leveraged aggressive lobbying, strategic political donations, and a “revolving door” between government and private sector roles to secure lucrative contracts. While these tactics are not new, their scale and implications for fair competition have raised alarms among investors and watchdogs alike.

The Palantir Playbook: Lobbying, Connections, and Contract Bonanzas

Palantir Technologies has emerged as a poster child for the fusion of political access and defense contracting. From 2023 to 2024, the company spent over $10 million on lobbying, with more than two-thirds of its lobbyists having prior government experience. This “revolving door” strategy—hiring former officials and placing its own executives in key government roles—has positioned Palantir as a gatekeeper in national security and data analytics.

The results? A string of high-profile contracts, including a $1 billion software deal with the U.S. Navy in 2024 and a $30 million ICE contract for migrant tracking. Under the second Trump administration, Palantir secured $300 million in new business, including deals with the FAA, CDC, and HUD. Critics argue that these wins are not solely due to product quality but stem from Palantir's ability to shape policy and procurement processes. For instance, the company's CTO, Shyam Sankar, authored a 4,000-word manifesto advocating for Pentagon procurement reforms that align with Palantir's business model.

Salesforce's Subtle Influence: PACs and Internet Policy

While Palantir's approach is overtly aggressive, Salesforce's strategy is more nuanced. The company's PAC, the “Voluntary Political Participation Network,” raised $29,051 in H1 2025, all from individual donors. Though modest compared to Palantir's spending, Salesforce's lobbying efforts are focused on the Internet industry, targeting issues like data privacy and digital infrastructure. This aligns with its core business and positions the company to influence regulations that could favor its cloud and SaaS offerings.

Salesforce's government contracts, including GSA Multiple Award Schedules and state-level IT deals, reflect its ability to secure long-term partnerships. However, its absence from major defense contracts (outside of indirect support roles) suggests a different risk profile compared to Palantir.

The Risks of Political Favoritism

The implications for investors are twofold. First, companies with deep political ties may gain unfair advantages, crowding out smaller competitors and distorting market dynamics. For example, Palantir's dominance in AI-driven defense systems has raised concerns about monopolistic practices, particularly as traditional contractors like Boeing and Lockheed Martin struggle to keep pace.

Second, regulatory backlash is inevitable. The UK's NHS contract with Palantir, worth £330 million, faced legal challenges over data privacy and transparency. Similar scrutiny in the U.S. could lead to tighter oversight, higher compliance costs, and reputational damage. Investors must also consider the long-term sustainability of contracts tied to partisan agendas—such as Palantir's alignment with the Trump administration—which may face renegotiation or cancellation under future administrations.

Investment Advice: Diversify and Watch the Lobbying Clock

For investors in defense-related equities, the key takeaway is to balance exposure to high-growth, politically connected firms with more diversified plays. Palantir's stock has surged due to its contract wins and Trump-era momentum, but its reliance on political favoritism makes it a volatile bet. Salesforce, while less exposed to defense-specific risks, offers a steadier trajectory through its focus on enterprise software and regulatory-friendly lobbying.

However, the broader defense sector remains vulnerable to policy shifts. Investors should monitor lobbying expenditures, government contract awards, and regulatory developments closely. Diversifying across defense primes (e.g., Raytheon, Northrop Grumman) and tech enablers (e.g., Microsoft, Amazon) can mitigate the risks of overreliance on politically sensitive players.

In an era where corporate influence and national security intersect, the line between innovation and favoritism is thin. Those who ignore the political undercurrents in defense contracting do so at their peril.