Executive Mosaic’s GovCon Index marked its best-day performance to start the shortened trading week but slumped the rest of the way. The index, which tracks the stock performances of 30 major government contractors, closed 1.02% lower at $5,016.21 before the weekend and lost -0.10% for the week.
US President Donald Trump’s decision to delay imposing tariffs on large trading partners Canada, Mexico, and China was a tailwind for stocks. The Dow Jones Industrial Average (+2.2%), S&P 500 (+1.7%), and Nasdaq Composite (+1.71%) recorded a second straight positive week despite ending four-day winning streaks on Friday.
Year-to-date, the GovCon Index is up 3.69%. Meanwhile, the blue-chip Dow Jones has gained +4.23% since year-end 2024 compared to +3.65% and +3.22% for the broad S&P 500 Index and tech-heavy Nasdaq Composite.
Sharp Selloff
The GovCon Index advanced +2.93% on Tuesday, then tanked -1.52% on Thursday. Market analysts say the plan of the Department of Government Efficiency to reform government contracting soon could be the reason for the sudden retreat of defense stocks.
Palantir Technologies (Nasdaq: PLTR), GCI’s top performer in 2024, gained 14.07% in the last five trading days, aided by an outperform rating. Parsons (NYSE: PSN) and CACI International (NYSE: CACI), the week’s worst performers, declined -13.65% and -11.31%, respectively.
Still, the GovCon Index is up 3.69% year-to-date. The blue-chip Dow Jones has gained +4.23% since year-end 2024 compared to +3.65% and +3.22% for the broad S&P 500 Index and tech-heavy Nasdaq Composite.
Capitalizing on Strong AI Demand
On Jan. 23, Wedbush analyst Daniel Ives raised its price target for Palantir Technologies to $90. As of this writing, the AI stock trades at $78.98 per share. Ives expects the data analytics firm to benefit from the increased spending on artificial intelligence over the next few years.
Trump announced the Stargate Project, a joint venture between Oracle (NYSE: ORCL), Open AI, and Japan’s SoftBank. The entity will invest $500 billion to build a new AI infrastructure. Its ultimate goal is to maintain American leadership in AI technology and enhance national security. According to Ives, Palantir could generate more than $1 billion in revenues in the coming years.
Parsons announced entering a Cooperative Research and Development Agreement or CRADA with the U.S. Army Command, Control, Communications, Computer, Cyber, Intelligence, Surveillance and Reconnaissance Center to support Project Linchpin, the Army’s emerging Artificial Intelligence and Machine Learning program.
Ryan Gabriele, senior vice president and chief technology officer for Parsons Defense and Intelligence market, said, “This cooperative agreement further enhances our growing portfolio in the rapidly maturing Department of Defense AI/ML community and directly supports the Army’s Modernization Strategy.”
