Well, well, well… looks like Palantir finally ran out of luck. If you’ve been waiting for the day this stock stops acting like a meme-fueled Zyn addict, congrats…your moment has arrived.

Shares of the AI defense leader are down 10%, erasing nearly $30 billion in market cap in a single session, marking its worst trading day in nearly two years. The stock, which had been going straight up with barely any red days, finally hit the canvas after two gut punches that left investors questioning just how invincible Palantir really is.

First, CEO Alex Karp decided to get a little sell-happy, adopting a new stock trading plan that lets him offload 9.98 million shares over the next six months. That’s nearly $1.12 billion worth of stock at current prices. Palantir diehards can spin this however they want, but Karp’s move wasn’t exactly subtle… it came right before a bombshell that could kneecap Palantir’s government-heavy revenue stream.

(Source: CNBC)

The second blow came when the Pentagon was ordered to cut its budget by 8% per year for the next five years… a huge shift in U.S. defense spending. The plan, reportedly spearheaded by Defense Secretary Pete Hegseth (the guy who said he hasn’t washed his hands in 10 years on live tv) and also Trump’s newly minted Department of Government Efficiency (DOGE), aims to shrink federal spending and cut bureaucratic waste. 

The current defense budget stands at $850 billion, meaning an 8% reduction could carve out more than $68 billion annually, with a cumulative reduction of over $340 billion over five years. If you’re a defense contractor like Palantir, which derives 55% of its revenue from government contracts, this is the kind of news that turns diamond hands into paper-mache palms.

Even Karp, who loves to rant about how Palantir is “misunderstood” like a goth teenager, knows when to take profits. His new trading plan, revealed in a Tuesday night SEC filing, is a textbook case of “cash in while the getting’s good.” Investors don’t typically panic over some insider selling, but when the CEO dumps a boatload of shares right before a major government contract shakeup? Yeah, that’s a red flag the size of Texas.

Despite the drop, the stock still trades at a ludicrous 600x price-to-earnings ratio. For reference, even high-growth tech stocks like Nvidia and Tesla trade at far lower multiples, making Palantir’s valuation seem like a house of cards built on AI hype and government dependency.

If Palantir’s AI models didn’t predict this, they might need a software update. The company’s revenue last quarter came in at $828 million, up 36% year-over-year, beating estimates, but with the Pentagon now forced to tighten its purse strings, that growth rate might not hold up for long. While Palantir has made strides in the commercial sector (U.S. commercial sales spiked 64% last quarter) it’s still a fraction of the business, and government contracts remain the company’s big cheese. If those dry up or even slow down, that inflated P/E ratio could come crashing down faster than Karp’s personal stake in the company.

Before this morning, Palantir had skyrocketed 350% over the past year and was one of the S&P 500’s best-performing stocks. But as we’ve seen before (cough 2021 cough 2022), what goes up ridiculously fast can come crashing down just as quickly. Now, I’m personally not willing to go there just yet, but some analysts are already whispering about a potential 50% correction to $60 per share if revenue slows and margins get squeezed.

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Stock.News has positions in Tesla.