AI Bubble Watch on Palantir

Stock markets wanted to blame reports of a potential budget cut by the Department of Defense for the drop in Palantir Technologies (PLTR) shares. Last week, Palantir stock peaked at around $125 but closed at $101.35 on Feb. 22. The software firm previously enjoyed a relentless uptrend after the S&P 500 (SPY) added it to the index.News of the potential DOD spending cut hurt shares of Oracle (ORCL), Cloudflare (NET), Fortinet (FTNT), Workday (WDAY), Salesforce (CRM), Salesforce (CRM), and MongoDB (MDB).Insider selling may explain the sudden drop in Palantir stock. CEO Karp has a net worth of $10.2 billion. He is actively selling Palantir stock. In 2024, he sold $1.95 billion worth of stock. He filed plans to sell up to $1.2 billion more this year. Those are significant sales but should not surprise markets.Investors may take a look at the pullback in PLTR stock as a potential opportunity. Defense Secretary Pete Hegseth suggested cutting 8% of the defense budget in each of the next five years. However, Russia’s threat will only worsen if the U.S. spends less on this industry. The government may conclude that a cost cut of that size is not possible. China is spending more. To stay ahead, the U.S. may need to continue buying solutions that Palantir offers.