Palantir’s Pentagon dream just hit a classified snag

Palantir has worked for years to change how people see it, going from a secretive data-mining contractor to a full-fledged battlefield innovator. 

But a newly leaked Army memo may force the company to take on a more familiar role: the center of controversy.

The document, written by the U.S. Army's chief technology officer and dated Sept. 5, was very clear. It said the experimental battlefield platform Palantir is creating with Anduril and Microsoft is "very high risk," according to a Reuters report. 

Not because of how well it works, but because it could let the wrong people misuse it.

We cannot control who sees what, we cannot see what users are doing, and we cannot verify that the software itself is secure, the memo said.

It's not a small irony for a company that has long been known for intelligence work and black-box data systems.

And investors took notice. After reports of the memo surfaced, Palantir's stock fell by more than 7%. 

The company quickly responded, saying the report was based on an old picture and that its main platform had no security flaws. Anduril said the same thing.

People are still worried about the episode, not just because of Palantir's tech, but also because of how Silicon Valley's "move fast and break things" attitude clashes with the harsh math of national defense.

As the Pentagon spends billions on new tools, the real question may not be whether these companies can come up with new ideas, but whether they can be trusted to do so.

Palantir battlefield tool prompts stark security warning

The memo that warned of the Palantir defense platform's vulnerabilities, scaring investors, didn't come from a competitor or a watchdog; it came from inside the Pentagon.

Army's Chief Technology Officer Gabriele Chiulli wrote the internal review. It said that the NGC2 (Next Generation Command and Control) system was very open to attack. 

The review noted that there were no limits on who could access what data, there was no way to see what users were doing, and there was no way to check whether the software was safe. 

In simple terms, it said "any user can potentially access and misuse sensitive" classified information without any way to track it.

The suggestion that third-party apps running on the system hadn't been checked for security was even more disturbing. Some of these apps were said to have hundreds of unresolved vulnerabilities.

Related: Tesla’s Oct. 7 reveal could redefine its future, or expose its limits

That evaluation is very different from what Palantir and Anduril have been saying: that they are making battlefield tools that are faster, lighter, and smarter than those made by traditional defense contractors. 

And to be fair, Army officials later said that many of the problems have been fixed since then.

But the memo's language and how quickly it got to public markets reveal a bigger problem.

Defense isn't just about technology; it's all about trust. And in this case, the stars of Silicon Valley may have moved too quickly for Washington's taste.

Army memo flags deep risks in Palantir's NGC2 platform

NGC2 is the platform at the center of the firestorm. 

It was meant to show off a new kind of military technology. Anduril made the system with Palantir and Microsoft as key subcontractors. 

It is fast, flexible, and based on the software culture of Silicon Valley. The goal is to update the Army's real-time connections between troops, vehicles, and battlefield sensors.

More Palantir

• Palantir lands surprise AI deal with 109-year-old titan
• Salesforce CEO sends message on Palantir after $950M deal
• Bank of America revamps Palantir stock outlook after AIPCon

However, the Army CTO's memo says that the system moved too quickly. One of the most worrying things it said was that anyone, no matter their clearance level, could access all apps and data, and there was no way to see who did what. 

That could let people who shouldn't have access to sensitive military information get to it, use it for criminal purposes, or evade security measures without being caught.

Not even apps from other companies that were hosted on the system were safe. The memo said that one of them showed 25 high-severity code vulnerabilities, and three others that were still being looked at had more than 200 problems.

Related: Veteran analyst drops 3-word verdict on AMD and OpenAI deal

Palantir quickly pushed back. A company spokesperson said there were "no vulnerabilities were found in the Palantir platform." Anduril called the evaluation an "outdated snapshot."

The Army's warning still hit hard, and not just because of the software. It brought up a much bigger worry: Who will really be in charge of the wars of the future?

Investors react as Palantir defends its military role

The leak didn't just shake things up in Washington; it also shook things up on Wall Street. 

On Friday, Oct. 3, Palantir shares dropped more than 7%, the biggest drop in a single day since August. The drop happened just a few weeks after the stock had gone up more than 2,000% in three years, thanks to the company's growing presence in defense AI.

Related: The stock market laughed, then Palantir redefined the fight

The idea that a U.S. Army program might be compromised hit Palantir's loyal investors like a gut punch.

The company has branded itself as the "secure alternative" to old defense contractors, saying it could outsmart Lockheed Martin and outcode Microsoft. Now, it has to protect that reputation.

Even a short breach of trust can move markets when a company sells trust to the Pentagon — especially when that trust is the thing itself.

Politics, power, and Palantir’s Pentagon play

The stakes are much higher than just a broken prototype. Palantir's growth in the Defense Department has always been as much about politics as it is about technology. 

Peter Thiel, one of the company's co-founders, is still one of President Doland Trump's most important Silicon Valley allies. 

Palmer Luckey, the founder of Anduril, is another vocal Trump supporter who has often called his company a patriotic alternative to "slow-moving" Beltway defense giants.

Related: Electronic Arts buyout may be loudest edge public rivals ever get

The alliance has worked out well. Under Trump's presidency, Palantir has won a number of contracts, including a $480 million contract for Project Maven, the Pentagon's AI system that looks at drone and satellite images. 

Anduril, on the other hand, just got a $159 million contract to make mixed-reality systems for U.S. soldiers.

But proximity to power can be a double-edged sword.

For Palantir, the challenge is no longer fixing code; it's proving that it belongs in a world where one security memo can make a partnership a liability.

Silicon Valley’s biggest test in uniform

The Army's review of Palantir's battlefield technology may fade from the headlines, but its message remains. 

For years, Palantir has positioned itself as the link between Silicon Valley's brilliance and the Pentagon's bureaucracy — a software company capable of doing what defense behemoths cannot. 

Building tools for war, however, is more than just speed and code. It is about control, accountability, and the hidden costs of moving too quickly.

Few people in Washington doubt that Palantir will weather this episode. Its technology is still deeply embedded in the military and intelligence community, and its leaders have strong allies in politics and finance. 

However, as AI systems and battlefield analytics become more autonomous, the trust gap between coders and commanders will only grow.

The real risk for Palantir isn't a temporary drop in its stock price. It arises when the institution being modernized begins to question the cost of innovation itself.

Related: Elon Musk’s Netflix boycott could actually hurt the streamer