Palantir Technologies Inc. (PLTR) gave back some premarket gains Thursday, even as defense stocks rallied on escalating geopolitical tensions and expectations for a sustained global rearmament cycle.
The backdrop is straightforward: military conflict, industrial policy, and national security concerns are converging, and governments—especially the U.S.—are responding with significantly higher defense budgets. Markets are repricing defense exposure accordingly.
The shift accelerated after President Donald Trump proposed a $1.5 trillion U.S. defense budget for 2027. That's a jump of more than 50% from current levels, and it's not just a number floating in the ether. Trump's spending push coincides with an aggressive expansion of U.S. military posture, including recent actions like the capture of Venezuelan President Nicolás Maduro. Defense spending is being reframed as strategic necessity, not discretionary spending.
According to a 2025 Barron's report, Palantir's stock is positioned to benefit from rising defense expenditures. But there's a catch: Trump is also reshaping how those defense dollars get deployed.
The administration is warning contractors to accelerate production or face penalties. Trump has signaled restrictions on dividends and share buybacks until companies expand capacity, R&D, and output, Bloomberg reported Thursday. Translation: if you want defense dollars, you need to reinvest them, not return them to shareholders.
Valuation Concerns Meet Strong Fundamentals
CNBC's Jim Cramer acknowledged that investors remain cautious about Palantir's premium valuation. Fair enough—the stock isn't cheap by any traditional metric. But Cramer argued the fundamentals support continued optimism.
He pointed to a Truist note highlighting Palantir's ability to deliver rapid growth while maintaining profitability under the "rule of 80," a benchmark that combines revenue growth and profit margins. Few companies pull that off, especially at scale.
Cramer also emphasized strong customer feedback, noting that Palantir's software helps organizations become leaner, faster, and more effective. That matters in an environment where efficiency and execution are getting prioritized over flashy growth numbers.
PLTR Price Action: Palantir Technologies shares were down 2.37% at $177.38 at last check Thursday.