Palantir Stock Drops on Pentagon Cuts

FINANCE
Palantir Stock Drops on Pentagon Cuts

Palantir’s stock, which had surged nearly 600% since early 2024, tumbled nearly 20% in two days following reports that the Pentagon plans to cut defense spending. The U.S. government accounts for about half of Palantir’s revenue, making the company highly sensitive to budget shifts.

The proposed cuts, ordered by Secretary of Defense Pete Hegseth, call for an 8% annual reduction in spending over five years. The move coincides with layoffs of thousands of probationary workers in the Department of Defense under the Elon Musk-backed Department of Government Efficiency.

Despite posting strong Q4 earnings with $828 million in revenue—a 36% increase—Palantir faces uncertainty. CEO Alex Karp has championed U.S. military superiority but hasn’t always aligned politically with Trump. Meanwhile, Palantir is integrating Musk’s xAI chatbot Grok into its AI platform, signaling deeper ties with the billionaire. With budget cuts looming, Palantir’s future government contracts remain in question.

TECH
Alibaba Beats Earnings Expectations Strongly

Alibaba reported a net income of 48.95 billion yuan ($6.72 billion) for the quarter ending December 31, exceeding LSEG’s forecast of 40.6 billion yuan. The company, once the target of a sweeping regulatory crackdown by Beijing that began in 2020, is now focusing on expanding its AI and cloud capabilities.

Analysts at Barclays predict Alibaba’s next three years will mark its most significant investment phase in AI and cloud infrastructure. This shift aligns with broader trends in China’s tech sector, where companies are racing to develop cutting-edge AI solutions despite regulatory challenges.

Alibaba’s strong earnings performance suggests resilience, even as it navigates evolving government oversight. The company’s strategic bet on AI and cloud computing signals an effort to stay competitive with global tech giants. As it ramps up investments, the next few years could define Alibaba’s future in China’s rapidly evolving digital economy.

TECH
Broadcom Eyes Intel Acquisition Potential

Broadcom is reportedly considering acquiring Intel’s product business, a move that would test its M&A expertise. The deal hinges on finding a buyer for Intel’s struggling chip fabrication unit, which lost over $13 billion last year. Regulatory hurdles, particularly from China, could also complicate the acquisition.

Intel’s market value has plummeted, making any takeover speculation attractive to investors. Its stock surged 9% Tuesday, following a 24% jump last week amid rumors of a U.S.-brokered deal involving Taiwan Semiconductor Manufacturing.

Broadcom’s AI-driven growth has propelled its market cap past $1 trillion, with AI now accounting for 26% of sales. Analysts warn acquiring Intel could dilute that exposure. However, Broadcom CEO Hock Tan’s track record in cost-cutting and strategic acquisitions could make the x86 chip business a viable addition. Despite Broadcom’s $58.2 billion in net debt, analysts believe the deal, if executed well, could be highly beneficial.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.