Palantir shares continued to decline on Thursday, extending a sharp sell-off.
The stock fell nearly 9%, following Wednesday’s 10% drop, which marked its worst trading day since May.
The sell-off came after shares briefly reached an all-time high earlier in the week, only to reverse sharply.
Wednesday’s crash came following reports that Defense Secretary Pete Hegseth was looking at potential deep cuts to the US defense budget.
The Washington Post reported that Hegseth has instructed Pentagon officials to prepare for annual budget reductions of 8% over the next five years, raising concerns about future government contracts for defense technology firms like Palantir.
Investor sentiment toward Palantir has also been weighed down by news that CEO Alex Karp plans to sell up to 10 million shares over the next six months.
Palantir: the retail darling
Palantir had been a major beneficiary of investor enthusiasm surrounding artificial intelligence, making it one of the best-performing stocks in the S&P 500 last year.
The company has become a retail investor favorite, with Vanda Research data showing it trailing only Nvidia, Tesla, and the SPDR S&P 500 ETF Trust (SPY) in net inflows from individual traders in early 2025.
JPMorgan data also indicated Palantir was among the most bought stocks by retail investors over the past week.
Despite the recent pullback, Palantir executives have expressed optimism about the company’s future in defense and government contracts.
They believe officials in the newly created Department of Government Efficiency will recognize the value of Palantir’s technology.
Wall Street analysts on Palantir stock
Palantir Technologies (NASDAQ: PLTR) received a new “buy” rating from Loop Capital on Thursday, despite market concerns over potential US defense budget cuts.
Loop Capital initiated coverage with a $141 price target, emphasizing Palantir’s role in the AI-driven enterprise revolution.
The firm highlighted the company’s AI data platform, which employs an Ontology framework to enhance AI-driven decision-making for enterprises and government agencies.
While acknowledging valuation concerns—trading at nearly 44x estimated 2027 revenue—Loop Capital compared Palantir’s long-term potential to Adobe in digital marketing and Salesforce in cloud computing.
Wedbush also reaffirmed its “outperform” rating with a $120 price target, dismissing concerns about defense budget reductions.
The firm argued that Palantir is positioned to benefit from shifts in Pentagon spending, expecting the company to secure more IT budget allocations due to its ability to streamline and optimize military AI investments.
Analysts also pointed to Project Stargate, a government AI initiative, as a key growth driver.
Wedbush likened Palantir’s strategic positioning in the AI sector to Oracle and Salesforce, stating that the company is advancing in the AI arms race while competitors lag.
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