BigBear.ai (BBAI -9.59%) stock saw a steep valuation pullback in this week's trading. The software specialist's share price closed out the period down 24.7% from the previous week's market close, according to data from S&P Global Market Intelligence.

BigBear.ai stock tumbled this week following news that the Trump administration is directing the Department of Defense (DOD) to proceed with significant budget cuts. The company's share price also saw big sell-offs in conjunction with the market's reaction to macroeconomic risk factors later in the week's trading.

BigBear.ai stock slumps on defense budget cuts

Reports emerged this week that Defense Secretary Pete Hegseth had requested the DOD identify $50 billion worth of budget cuts to be implemented in the next fiscal year. The cuts work out to roughly 6% of the existing budget, and some reports suggested that Hegseth would request additional cuts on that level in subsequent years. With BigBear.ai relying on winning government defense contracts to drive its sales growth, the prospect of substantial spending reductions raised the possibility that the company's expansion opportunities will be weaker than anticipated.

Macroeconomic risk could create volatility heading into BigBear.ai's Q4 report

BigBear.ai and other growth-dependent artificial intelligence (AI) stocks saw big sell-offs to close out the week as bearish macroeconomic indicators dampened optimism among investors. The broader market saw a significant pullback in Thursday's trading after Walmart guided for weaker-than-expected sales growth this year. The retail giant is often looked to as a key bellwether for the state of the U.S. consumer economy, and investors weren't happy with the company's guidance for between 3% and 4% sales growth this year on the heels of 5.6% growth last year.

Selling pressures for the broader market intensified in Friday's session, with a selection of new bearish macroeconomic indicators spurring pullbacks for equity valuations. Existing home sales declined in January, and the University of Michigan's tracking showed that consumer confidence eroded significantly in the month. Data from S&P Global also showed weaker-than-expected data for the U.S. manufacturing and services sector.

Weakening indicators for U.S. macroeconomic health added to pressures from the news of the DOD defense cuts, but BigBear.ai stock is still up 54% over the last month. Investors will get a closer look at the company's recent business performance outlook with the company's upcoming Q4 release and conference call, which is scheduled to take place after the market closes on March 6.