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(Bloomberg) -- Palantir Technologies Inc. shares fell 10% on Wednesday, and continued to slide in after-hours trading, following a report that US Defense Secretary Pete Hegseth has asked officials for plans on how to slash military spending.
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Palantir, which has seen its stock soar by almost 50% this year, is a major US defense contractor. It also sells technology and artificial intelligence products to other allied governments and private companies.
“Palantir’s US government segment growth — more than 40% in the past two quarters — may have much greater exposure to any cuts in the US defense budget,” Bloomberg Intelligence analyst Mandeep Singh wrote in a note. He added that government sales make up more than half of the company’s total revenue.
On Wednesday, the Washington Post reported that Hegseth has ordered senior military leaders to develop plans for cutting 8% from the defense budget in each of the next five years, according to a memo sent to senior officials. Bloomberg previously reported news of the intended cuts, before distribution of the memo.
The cuts could have wide-ranging effects, especially if they target parts of the Pentagon that pay for legacy programs — such as Lockheed Martin Corp.’s F-35 fighter jet — that Trump advisers such as Elon Musk have said are too costly and should be replaced.
In a note accompanying the cuts, Hegseth said programs including those linked to submarines, drones, munitions and missile defense would be exempt. But costly weapons systems such as the F-35 weren’t declared off limits, raising the likelihood that major defense contractors such as Lockheed and Boeing Co. might see fewer contracts in the future.
This week, Palantir Chief Executive Officer Alex Karp came out with a new book calling for more patriotism from Silicon Valley. He also urged tech companies to seek closer ties with the US.
The company’s government work has contributed to surging sales in recent years, helping send its stock on a tear. The shares gained 340% last year, following a 167% run-up in 2023.
Palantir was co-founded by Peter Thiel with the goal of preventing a repeat of the 9/11 attacks. The company’s software was first used by the US intelligence community before spreading to all branches of the military and allied defense forces.