Key Takeaways

• Palantir shares tumbled on Wednesday and Thursday on expectations of defense spending cuts; this week's losses put the stock in correction territory.

• Some analysts said the selloff could present a buying opportunity, expecting Palantir's flagship AI offerings could win it more business from the government in a tighter spending environment.

• Despite recent losses, Palantir shares have more than quadrupled in value over the past 12 months.

  Palantir CEO Alex Karp at The Hill & Valley Forum on AI Security in Washington, D.C. on May 1, 2024.

As Palantir shares tumbled Thursday, extending losses on expectations of defense spending cuts, some analysts suggested the selloff could be an opportunity to buy the dip. 

Shares of Palantir sank another 5.2% on Thursday after plunging 10% on Wednesday, after The Washington Post reported the Trump administration directed the Pentagon to trim the U.S. defense budget by 8% annually for the next five years.

The U.S. government is a key client for Palantir, accounting for over 40% of its revenue in the fourth quarter, raising worries a pullback in defense spending would deal a major blow to the data analytics software provider. 

However, Wedbush analysts said “this is exactly the opposite” of how they believe cuts could affect Palantir, anticipating its flagship Artificial Intelligence Platform and potential to streamline operations could win Palantir more business from the Pentagon in a tighter spending environment.

Earlier this month, analysts at Bank of America, Citi, UBS, and Morgan Stanley voiced similar sentiments, and boosted their price targets for the stock in the wake of Palantir’s strong fourth-quarter results. 

The Wedbush analysts called Palantir one of their “top names to own in 2025,” in a note to clients Thursday, adding they believe the company could become “the next Oracle or Salesforce” and reach a market cap in the trillions of dollars in the years to come. Their price target of $120 represents a nearly 13% premium to Thursday’s intraday price. 

Loop Capital analysts were even more bullish on the stock, reportedly initiating coverage Wednesday with a $141 price target, calling it a “game-changing software stock.” They also advised clients to view a pullback in the stock’s price as a buying opportunity.

This week’s selloff dragged Palantir stock into correction territory, with shares down 15% from their record-high close Tuesday. Still, they’ve more than quadrupled in value over the past 12 months.