Palantir stock soared 600% on deportation policies, AI, and its contracts with the U.S. military—but Trump sent it spiraling after a call to slash costs at the Pentagon
Data analytics software company Palantir is coming back down to earth after an early stock surge this year. Best known as a defense contractor for the U.S. military and other agencies, Palantir’s share price fell about 8% on Thursday, piling on a 10% slide Wednesday following a report of U.S. plans to slash military spending.
Secretary of Defense Pete Hegseth told senior Pentagon leaders to develop plans to cut defense spending by 8% each year for the next five years, according to an internal memo,
theWashington Postreported
Wednesday. The Pentagon’s 2025 budget is about $850 billion. The spending cuts are in tandem with the expected
firings of thousands of probationary workers
in the Department of Defense this week, facilitated by the Elon Musk–championed Department of Government Efficiency.
Palantir reported fourth-quarter 2024
earnings
earlier this month, posting a better-than-expected $828 million in revenue—a 36% year-over-year increase—which Karp attributed to the company’s
investment in generative AI
.
Before this week’s drop, Palantir’s stock had
catapulted 585%
since early last year and soared nearly 50% in 2025 alone, not only because of its bet on AI, but also on its steadfast relationship with the U.S. Around
half of its revenue
comes from contracts with the American government. During President Donald Trump’s first term, Palantir was buoyed by an
$800 million contract
with the U.S. Army in 2019, and through former President Joe Biden’s term, the company provided technologies to crack down on illegal immigration and those seeking asylum in the U.S.
Immigration and Customs Enforcement and Citizen and Immigration Services spent $7.8 billion on tech from 263 companies to address immigration since 2020, according to
aNew York Timesreview
of nearly 15,000 contracts. Palantir received about $1 billion from the government during that time. Trump’s immigration policy—catalyzed by a barrage of
10 executive orders
his first day in office ramping up border security—would indicate this pattern of spending continuing into his second term.
Palantir did not respond to
Fortune
’s request for comment.
Palantir’s relationship with the U.S. government
Built on the ideology that a Western nation should have technological and military superiority over the rest of the world, Palantir
counted the CIA
as its first—and only—customer in its early years between 2005 to 2008. Karp’s book
The Technological Republic: Hard Power, Soft Belief, and the Future of the West,
released Tuesday, furthers this ideology,
calling on Silicon Valley
to show more patriotism and forge deeper ties with the U.S. government.
Despite billions of dollars in U.S. government contracts and hopes of U.S. technological supremacy, Karp has not always seen eye-to-eye with Trump, diverging from Palantir cofounder Peter Thiel’s
support
of the president. Karp supported former Vice President Kamala Harris in the 2024 presidential election. He has
qualified Palantir’s contracts with ICE
, saying the company does not do business with the agency’s enforcement and removal operations division that carries out many of the country’s deportations.
Karp, however, has offered his support for DOGE and Musk’s aggressive cost-cutting tactics—even as the advisory’s efforts may have clipped the wings of one of its customers. Palantir announced this month plans to
integrate Grok
, the Musk-owned xAI chatbot, into its AI platform.
“What the progressive left should be doing is saying, ‘Okay, Elon, you’re clearly the most qualified person in the world to do something like this. We want a dialogue with you about what you’re doing, how you’re doing,’” Karp
told CNBC
on Wednesday. “I don’t believe that’s happened.”
