While President Donald Trump’s military spending priorities are taking shape, investors still seem to know what it means for overall military spending, or for defense stocks. For now, investors are taking a sales first-line interrogation approach to the sector.
Despite the expected defence cuts appear to be limited to the company, shares of high-leaps data analytics company and military contractor Palantir Technologies were raising pigeons on Wednesday. On Wednesday, the Washington Post reported that the Trump White House had cited a memo to warn the Department of Defense’s budget cuts. The reduction is 8% per year over five years.
After that, Defense Secretary Robert Sales appeared to be clear about his intentions, noting in a news release that the president called for a cut of about 8% of the fiscal year 2026 budget by $50 billion.
Additionally, cuts will help fund presidential priorities, such as border security and drones. “President Trump’s accusations on the department are clear, to achieve peace through force,” Celes said.
The $50 billion real location will become a “nothing burger” for the defense, written by vertical research partner analyst Rob Stallard in a report Thursday. Still, the reason investors are nervous is simple. The past 12 months amounted to around $900 billion, according to Treasury data.
At the end of the five-year 8% reduction, that number is approaching $600 billion. This is almost repeated that the US spent defense in 2017. That year, Lockheed Martin generated around $51 billion in sales. The stock closed at around $330 a year, trading estimated revenues of about 24 times the expected forecast for the next 12 months.
Today, Lockheed’s shares are around $433, and the company is expected to reach around $74 billion in 2025, an increase of about 45% from 2017. Investor nerves mean multiples of valuation. Stocks of Lockheed, Northrop Grumman, General Dynamics, and L3harris Technologies will reduce its earnings in 2025 on average by about 16 times, from about 18 times before the November 5th presidential election.
Entering trading on Thursday, the four stocks fell almost 20% since the election. Drone manufacturers have been flying roughly recently. As they entered trading on Thursday, shares in unmanned technology provider Kratos Defense & Security Solutions have risen about 16% since the election. It’s impressive. Still, stocks have fallen by more than 17% over the past two weeks.
Recent news appears to have even been a hit with Palantir stock, which offers software and artificial intelligence solutions to the Department of Defense. Stocks fell 10.1% on Wednesday. Wedbush analyst Dan Ives thinks it’s an overreaction. Lower spending on traditional defense technology increases spending on AI-enabled solutions, he wrote Thursday.
“The bear, who has hated Palantil from $12 to $120 over the last 18 months, has discovered the latest Silver Bullet negative paper… budget cuts,” Ives added. With pentagons, not that much. ”
He evaluates Palantir shares at the time of purchase with a price target of $120. It’s been difficult for investors to measure the sector these days, and that probably won’t change for months. Investors need to be ready when their spending outlook is so vague. Stocks in Lockheed, L3Harris, Northrop and General Dynamics were mixed in early Thursday trading.
Industrial average futures for the S&P 500 and Dow Jones fell by about 0.3%. Palantir shares fell 3.8% to $107.76 early on Thursday. The second day’s decline is due to profits and evaluations, such as budget fears.
Into trading Thursday, stocks have risen about 380% over the past 12 months. Additionally, Palantir’s shares traded in different stratospheres compared to traditional defense companies, earning about 209 times its profit in 2025. Growth is multiple reasons. Wall Street projects around 30% of its average annual revenue growth rate over the next few years.
