Palantir Technologies (PLTR) should be immune to the tariff war unfolding. Although shares of the data analytics company were already falling before President Trump launch his sweeping “Liberation Day” trade duties on U.S. trade partners, the broad impact and response to them is sending the Big Data AI firm tumbling harder.
PLTR stock 4% on Thursday in the aftermath of Trump’s tariffs, but then plunged another 11.5% on Friday when China retaliated by imposing 34% tariffs on U.S. goods. Its business is largely software-based, so there are no supply lines to be disrupted by higher import or export costs, however, China’s return salvo could signal an economic recession is in the cards and that might result in a slowdown in corporate spending.
The carnage doesn’t appear to be stopping either, as PLTR is down another 8% in premarket trading Monday. That would mean since hit an all-time high of $125 per share in February, PLTR stock has lost 46% of its value.
While government contracts comprise the bulk of Palantir’s business, representing 63%, or $1.2 billion, of total revenue, the data analytics shop has been trying to expand further into the enterprise market to diversify its revenue stream and because it is a bigger growth market.
However, the potential for cuts to its government contracts has grown following the election of Trump as he seeks to streamline spending and has the Department of Government Efficiency (DOGE) scouring line items to root out waste, fraud, and abuse.
Last month Defense Secretary Pete Hegseth signed a memorandum last month directing the department to cut more than $580 million in programs, contracts, and grants. There has been no reporting that Palantir Technologies’ business with the government has been affected, but the potential loss of revenue has weighed on its shares.
Palantir is also suffering due to its stock’s premium valuation. Even after losing 40% of its market value, PLTR still trades at 391 times earnings, 60 times sales, and 152x the free cash flow it generates.
While analysts are still forecasting Palantir’s earnings to grow at a 30% compound annual rate for the next five years, that could be impacted by budget cuts or a recessionary spending slowdown. PLTR stock is essentially priced for perfection and any potential disruption of its growth undermines the valuation.
The White House reports that 50 countries have already contacted Trump to negotiate a reduction in tariffs, and Vietnam, Taiwan, and Zimbabwe are ready to reduce their tariffs on U.S. products to 0% to end the trade war. Mexico is also reportedly delaying any response to the higher duties Trump imposed and is willing to negotiate.
Yet Europe is expected to retaliate with higher import taxes, to which Trump has promised to reciprocate with even higher tariffs on their goods. As much of Europe depends upon U.S. consumer spending to keep their economies growing, Trump is in a stronger negotiating position, but if prices soar here at home, it could become politically difficult.
Because it takes a long time to reshore manufacturing, any potential economic benefits could be delayed, which could throw the U.S. into a recession, hurting Palantir Technologies ability to keep growing as it needs to.
