Elon Musk's DOGE, Tightening Purse Strings Spell Trouble For Palantir: Here's Why The AI Darling Is Facing The Heat

Palantir Inc. PLTR has a lot at stake with the federal budget about to get slashed to the tune of $1 trillion by May this year, as part of the D.O.

G.E. initiative, spearheaded by Elon Musk.



What Happened: The Alex Karp -led company has had a tough couple of weeks, with the stock dropping nearly 33% since mid-February, losing $90 billion in market capitalization, all in response to the ongoing efficiency drive within the US Federal Government that seeks to cut unnecessary expenses. The DOGE team recently uncovered 1,000s unused software licenses within the government, and the Department of Defense went a step further and canceled its contracts with Oracle Corp. ORCL , citing delays and cost overruns.

While Palantir wasn’t impacted by any of this, the intention was made clear, wasteful expenses will not be tolerated. See More: Newsmax And The Curious Case of MAGA Media: Is The 2200% Rally In 2 Days An Anomaly Or A Trend? Adding to these concerns, Goldman Sachs Group Inc . GS analyst Gabriela Borges recently reiterated her ‘Neutral’ stance on the stock, citing valuation concerns and uncertainties regarding its long-term competitive edge.

After exploring Palantir’s core platform and features, including the new Ontology platform, Borges felt that the company’s competitive advantages could erode rather quickly as AI continues to advance across the board. It certainly didn’t warrant a valuation of nearly 450 times earnings. However, other analysts such as Wedbush have spoken out in favor of the company , citing long-term tailwinds from DOGE and the broader pursuit of governmental efficiencies.

Wedbush analysts said, “Palantir could actually gain more deals and IT budget dollars across various government agencies.” Why It Matters: With 40% of its revenues coming from government contracts, Palantir is poised to experience at least some headwinds in the near term. The last time the US government decided to balance the budget was in the early 2010s, during the sequestration, when IT stocks with exposure to the government saw their valuations evaporate.

Palantir could experience the same, not because it doesn’t add any value, but because its valuations are too high to justify any such volatility in earnings. Benzinga Edge Rankings show Palantir having strong growth and momentum, scoring at 86th and 99th percentile, respectively, while being tagged as unfavorable in the short-term, but favorable in the medium and long-term. For insights on more IT and defense stocks, check out Benzinga Edge Stock Rankings .

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