Palantir Technologies stock was sliding Monday as fears of a global trade war gripped Wall Street. While the decline followed a broader selloff in tech stocks, Palantir was uniquely positioned in the maelstrom.

Shares of the software company slumped 8.1% to $78.90, extending a five-day losing streak and dragging behind the S&P 500 and Nasdaq Composite, which were down 1.7% and 2.7%, respectively.

Other notable names in tech were falling ahead of April 2, so-called Liberation Day, when President Donald Trump has promised to unleash a barrage of tariffs. However, there were other woes compounding Palantir’s decline.

Morgan Stanley Research analysts noted Friday that tariffs, trade tensions, and potential spending cuts were underscoring a “potential for weaker IT spending demand” against a challenged macro backdrop.

Palantir is expected to be particularly hard-hit out of all the software stocks in the firm’s coverage, with Morgan Stanley putting it at higher risk for downward estimate revisions, in part due to “high federal exposure.”

It’s no secret that Palantir is a major government contractor. Federal spending accounted for the bulk of Palantir’s total U.S. revenue in fiscal 2024, comprising $1.2 billion out of a total $1.9 billion.

Shares have been battered by concerns about potential government spending cuts for months. While Palantir remains up more than 13% this year, the stock began sliding in February after the military was directed to identify $50 billion in programs that could be cut next year.

Another factors weighing on the stock is its high valuation. As of Friday’s close, Palantir stock was trading at a 149.57 times 12-month forward earnings. By comparison, the S&P 500 trades at 20.16.

Moreover, Palantir is what’s known as a high-beta stock. Beta denotes a stock’s volatility against the broader market. The three-year beta for Palantir is currently 1.8—a reading above 1 means a stock is more volatile than the S&P 500—putting its shares ahead of most of its index peers.

When ranked from highest to lowest beta, the stock comes in 19th, roughly tied with Tesla and Lam Research. Considering the tumultuous macro environment, this metric makes Palantir an unattractive bet to investors who want to minimize risk.

Morgan Stanley analysts pointed to a “tone change” relative to the fourth quarter, “where optimism around green-shoots of durable demand improvements in Q4 turned to acknowledge increased volatility.”

For now, companies with large deal exposure and consumption models remain the most at risk. The firm prefers “margin expansion stories” such as Intuit, Workday, and Autodesk, as well as companies that are “relatively more insulated from weakness” such as Fortinet and Palo Alto Networks.