This Artificial Intelligence (AI) Company Just Got Some Unwelcome News Regarding the Pentagon Budget Cuts (Hint: It's Not Palantir)

2 months ago 14

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Adam Spatacco, The Motley Fool

Tue, Apr 8, 2025, 2:45 AM 4 min read

When Republican statesmanlike nominee Donald Trump was campaigning, 1 of his much accordant talking points was a interest implicit areas of wasteful national spending. This rhetoric inspired the instauration of a caller programme called the Department of Government Efficiency (DOGE) aft Trump's predetermination triumph connected Nov. 5.

For the astir part, DOGE has focused connected cutting ties with costly contractors and organizations employed by assorted authorities agencies. Back successful February, Trump fundamentally extended the thought of DOGE to the military. Specifically, helium ordered Defense Secretary Pete Hegseth to place outgo savings astir the defense budget.

Shortly aft this quality became nationalist knowledge, shares of artificial quality (AI) analytics bundle darling Palantir Technologies (NASDAQ: PLTR) took rather a beating. Given the institution derives astir fractional of its gross from national contracts (much of it with the Department of Defense), it's not wholly astonishing that investors reacted emotionally to the quality of fund cuts astatine the Pentagon and assumed it was atrocious quality for Palantir.

Yet caller reporting suggests that the Department of Defense (DoD) is parting ways with different AI bundle player. Let's research immoderate of the Pentagon's caller moves and measure wherefore I'm doubling down connected my thought that Palantir has a unsocial accidental to payment from these outgo reductions.

On March 20, Hegseth published a memo successful which helium outlined the termination of $580 cardinal worthy of contracts that were deemed wasteful.

Among these deals was a declaration to physique a quality resources bundle platform. According to the DoD's memo, this declaration "is presently 6 years down docket and much than $280 cardinal (780%) implicit fund -- with astatine slightest 2 much years of improvement and investigating estimated earlier archetypal operating capability."

According to declaration records, the HR level was being managed by Oracle. While a determination similar this is simply a stroke for Oracle, I'll interruption down wherefore I spot it arsenic a imaginable tailwind for Palantir.

Hegseth and the Pentagon's enactment are taking a calculated, intentional attack to these outgo reductions -- implementing a strategy known arsenic the Software Acquisition Pathway (SWP). In different words, the DoD isn't simply identifying contracts attached to precocious dollar values and canceling them blindly. Rather, successful concern with DOGE, the Pentagon is looking intimately astatine its vendor relationships and digging into large contracts that are moving implicit fund and abnormally down schedule.