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Palantir (PLTR) stock is tumbling 11% after its CEO implemented a new stock-trading plan and a report stated that the Pentagon would look to cut its spending significantly.
Meanwhile, investment bank Wedbush defended PLTR stock.
The CEO's New Trading Plan
Under CEO Alex Karp's new initiative, he could sell as many as 48.9 million of his shares of PLTR stock, Barron's reported. The share sales could be worth as much as $1.23 billion, the publication added. The change was disclosed by the firm in an SEC filing on Tuesday.
Defense Cuts May Be Looming
Defense Secretary Pete Hegseth has asked the military to develop plans to reduce its budget by 8% annually for the next five years, The Washington Post reported, citing a memo that the defense secretary sent. Hegseth reportedly stated that a number of programs, including submarines and drones, would be spared from cuts. But IT, intelligence, and AI, Palantir's main areas of focus, were not among the areas listed by Bloomberg as being exempt from spending reductions.
Wedbush Defends Palantir
Wedbush's well-known analyst, Dan Ives, wrote that budget cuts by the Defense Department would actually result in "more opportunity" for PLTR. "Palantir's unique software approach will enable the company to gain more IT budget dollars at the Pentagon" in the wake of any cuts, the analyst predicted.
While we acknowledge the potential of PLTR, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PLTR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.