Palantir Technologies (NASDAQ:PLTR) fell more than 5.5% Monday to $80.79, continuing a five-day decline driven by market concerns over a potential $50 billion reduction in U.S. defense spending and scrutiny over the company's lofty valuation.

The stock's sharp decline came ahead of an expected policy announcement on April 2, dubbed Liberation Day, when President Donald Trump is expected to unveil a new round of tariffs. While broader tech indices also ended lower, Palantir's drop outpaced the S&P 500 and Nasdaq.

Analysts at Morgan Stanley (NYSE:MS) last week highlighted Palantir's heavy dependence on government revenue, flagging it as a risk in the face of federal budget pressures. In 2024, $1.2 billion of the company's $1.9 billion in U.S. revenue came from public sector contracts.

In February, the U.S. Department of Defense was directed to find areas for $50 billion in potential reductions, adding pressure on companies like Palantir, which have significant exposure to government work. The combination of high valuationreportedly near 150 times earningsand a volatile macro outlook continues to weigh on sentiment.

It's important to note that, Palantir's shares have seen a significant pullback in the past week, tumbling by roughly 9%. Over the last month, the stock has dipped about 3%, but remains up an impressive 124% in the past six months. Year to date, Palantir is still showing a healthy 9% gain. Meanwhile, the S&P 500 has also slid recently, though it hasn't matched Palantir's sharp swings on either the upside or downside.