Palantir and the Pentagon are tightening themselves in each other’s arms, and the market wasted no time pricing that in.
After the U.S. attack on Iran, Palantir stock climbed 15% in a week that was rough for almost everyone else.
Investors did not hide what they were betting on. Donald Trump showed no sign that the war in Iran would end fast, so money flowed toward a company that gets about 60% of its revenue from government spending. Palantir has also been expanding its work with military and intelligence agencies.
Palantir’s has the US Pentagon in a chokehold that threatens the entire world
That ugly dependence was spelled out by Emil Michael, the Defense Department’s under secretary for research and engineering and its chief technology officer, during a Friday episode of the All-In podcast.
He described what happened after the U.S. military raid on Venezuela in early January that captured dictator Nicolas Maduro. After that operation, Anthropic asked Palantir whether its AI had been used in the mission. Anthropic described the question as routine. The Pentagon and Palantir did not take it that way.
Michael said he immediately worried about what would happen if software controls, refusals, or guardrails blocked future military use at the worst possible time. He recalled thinking:-
“I’m like, holy shit, what if this software went down, some guardrail picked up, some refusal happened for the next fight like this one and we left our people at risk?”
Michael then said he went to Secretary Hegseth and warned him directly, describing the reaction inside the building as a shock. He said:-
“So I went to Secretary Hegseth, I said this would happen and that was like a whoa moment for the whole leadership at the Pentagon that we’re potentially so dependent on a software provider without another alternative.”
In April 2025, Hegseth ordered the Pentagon to cancel $5.1 billion in IT services contracts with traditional consulting companies Accenture, Booz Allen, and Deloitte, saying the work should move in-house, which just so happened to mean Palantir.
The result was simple. Old contractors lost space. Palantir gained room. The path being cleared matched Palantir’s business model almost too neatly.
Pentagon officials pressed AI firms for fewer limits while Palantir fought for more control
The fight goes beyond one company and one contract lane. Peter Thiel said in 2024 that AI “seems much worse for the math people than the word people.” Two years later, Alex Karp, Palantir’s co-founder and chief executive, used harsher words at the a16z American Dynamism Summit.
Alex said, “If Silicon Valley believes we are going to take away everyone’s white-collar job … and you’re gonna screw the military—if you don’t think that’s gonna lead to nationalization of our technology, you’re retarded.” He then added, “You might be particularly retarded, because you have a 160 I.Q.”
Alex’s language was offensive, but his point was clear enough. He was talking about a live fight over who controls military AI access. He said, “You cannot have technologies that simultaneously take away everyone’s job,” and then also be seen as undermining the military.
That tension matters for Palantir because companies such as Anthropic, OpenAI, Google, and xAI all have Defense Department contracts, but those deals come with limits on how their tools can be used when terms of service may be at risk.
The DOD has been negotiating with AI companies to remove those limits and let their technology be used for “all lawful purposes.”
Alex made clear he has no patience for companies that treat that demand as a moral line they will not cross.
“There’s a difference between U.S. military and surveillance. Despite what everyone thinks, Palantir is the anti-surveillance company.”
That is the argument he used while rejecting criticism tied to the company’s name, which comes from an all-seeing device in Lord of the Rings.
Alex said technical experts understand his point, while regular people online do not, adding, “so I end up in every conversation that I don’t want to be in.”