(Bloomberg) -The shares of Palantir Technologies Inc. 10% on Wednesday, and continued to slip in post -hours trading, following a report that US Secretary of Defense Pete Hegseth had asked officials on plans on how to cut military spending.
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Palantir, who has seen his stock ascending nearly 50% this year, is a major US defense contractor. It also sells artificial intelligence technology and products to other related governments and private companies.
“Palantir Government segment growth – more than 40% in the last two quarters – may have much more exposure to any cuts in the US defense budget,” wrote a Bloomberg Mandeep Singh intelligence analyst in a note. He added that government sales formed more than half of the company's total revenue.
On Wednesday, the Washington Post reported that hegseth ordered senior military leaders to develop plans for cutting 8% of the defense budget in each of the next five years, according to a memo sent to senior officials. Previously, Bloomberg reported news of the intended cuts, before distributing the memo.
The cuts could have wide effects, especially if they target parts of the Pentagon that pay for legacy-like programs-like F-35 Lockheed Fighter Jet Martin Corp.-Trump councilors like Elon Musk have said be too costly and should be replaced.
In a note that coincides with the cuts, hegseth said programs including those associated with submarines, drones, war weapons and defense would have been excluded. But costly weapons systems like the F-35 were not declared off limits, raising the likelihood of large defense contractors like Lockheed and Boeing Co. see fewer contracts in the future.
This week, Palantir CEO Alex Karp came out with a new book calling for more patriotism from Silicon Valley. He also urged technology companies to seek closer links with the US.
The work of the company government has contributed to surge sales in recent years, helping to send its stock on a tear. The shares won 340% last year, following a 167% run in 2023.
Palantir was co-founded by Peter Thiel with the aim of preventing the 9/11 attacks from repeating. The company's software was first used by the US intelligence community before spreading to all branches of the military and allied forces.