Stock market today: Dow, S&P 500, Nasdaq slide as Trump shakes hopes for an Israel-Iran truce

The US Department of Defense announced Monday that it awarded OpenAI (OPAI.PVT) a $200 million contract to “develop prototype frontier AI capabilities to address critical national security challenges in both warfighting and enterprise domains.”

“This contract is one of the largest Department of Defense contracts given to a software provider when measured by annual contract value,” William Blair analyst Louie DiPalma wrote in a note to clients Monday.

DiPalma said that the “contract announcement could signal increased competition from OpenAI going forward” for Palantir (PLTR) “if OpenAI moves into Palantir’s ontology territory.” Ontology refers to an operational layer in Palantir’s platform.

DiPalma noted that Palantir paved the way for OpenAI and others.

“Palantir has pioneered software providers serving as prime contractors for Department of Defense programs,” DiPalma wrote. “Traditionally, software providers served as subcontractors to systems integrators. Under the new administration, the Department of Defense is looking to contract directly with commercial software providers when possible.”

Palantir rose less than 1% on Tuesday.

In December, Palantir shares dropped as much as 5% when defense tech firm Anduril (ANIN.PVT) announced a partnership with OpenAI to “develop and responsibly deploy advanced artificial intelligence (AI) solutions for national security missions.”