Why Palantir has been the single best Trump trade
The politically connected AI and defense software company has been raking in contracts under the Trump administration.
Reporters with The New York Times laid out the growing scope of Palantir’s work with the federal government under the Trump administration, noting that the US has paid Palantir $113 million since President Trump took office, including funds from existing and new contracts (but not including the nearly $800 million contract expansion the Department of Defense awarded last week).
The Friday report sheds new light on the performance of Palantir shares in the Trump 2.0 era.
The stock has been, by far, the best performer among the so-called Trump trades, a group of companies that soared after Donald Trump defeated Joe Biden in 2024, as traders bet that the companies would derive some sort of benefit under the incoming administration.
The bet traders were making on some of these companies — like Taser maker Axon and private prison and deportation contractor GEO Group — was fairly straightforward, as Trump’s law-and-order rhetoric suggested he would prioritize deportations and law enforcement, channeling more government money toward their services.
But for some of the other entities that surged on the election, the potential benefits were a bit more murky.
After all, why would EV maker Tesla jump on the election of Trump, who signaled he wanted to phase out federal programs crucial to the company, except for the notion that the company would somehow benefit from CEO Elon Musk’s relationship with Trump?
Nobody on Wall Street would say it out loud. But a key element of the “Trump trades” was basically the pricing-in of political favors and preferential treatment — less politely put, corruption — benefiting companies like Tesla, which is both run by a staunch political ally and a former de facto member of the administration and reliant on federal tax credits and other incentives to sell its cars.
Palantir falls into this category, too. The company was cofounded 22 years ago by Peter Thiel, who, like fellow PayPal founder Elon Musk, is a politically active billionaire tech oligarch from South Africa. He is also the chairman and largest individual shareholder in Palantir, holding some $9 billion worth of Class A shares.
While Thiel has had an on-again, off-again relationship with Trump, he’s been instrumental in the business and political career of Vice President JD Vance, who worked at one of Thiel’s investment funds, and then was partially backed by Thiel when he started his own fund. Thiel also donated $15 million to Vance’s successful effort to win a Senate seat in Ohio.
Of course, all of Palantir’s recent performance can’t be linked to Trump — its focus on AI software is near the epicenter of some of the hottest trends on Wall Street. And the company has been a government contractor for over a decade, before Trump was in the White House.
But from a business perspective, Palantir remains reliant on US federal government spending, as the US is its single largest client.
The market understands just how important Uncle Sam’s relationship is to Palantir. Remember, it was rumors about deep cuts to defense spending — which ultimately proved incorrect — that cratered the company’s shares back in February.
But if The New York Times’ reporting is any indication, Palantir’s business with Uncle Sam is now booming, suggesting that traders betting on companies with cozy ties to Trump were seeing the situation clearly. And Palantir is flirting with a new record high on Friday.
