The US’ and Israel’s war with Iran has highlighted the newfound alliance between the tech sector and the US military after decades of strained relations, displaying a synergy that investors see as a gold mine.
Military-industrial heavyweights such as Lockheed Martin and Boeing are being joined by rising tech giants Palantir, Anthropic and Anduril in helping to keep the US war machine going.
Tech firms are increasingly involved in helping the US Department of Defense with everything from cloud computing to artificial intelligence (AI) powered drones.
Photo: Reuters
Maven, Palantir’s data analytics platform, has been used extensively in the offensive against Iran, as has Anthropic’s AI.
Anduril president Matthew Steckman said Monday that it was providing “one of the main defense systems” against Iran’s low-cost, long-range Shahed drones. The company announced a 10-year, US$20 billion contract with the US military.
Palantir’s chief Alex Karp called the developments “a huge shift in Silicon Valley.”
“When we started Palantir,” he said this month, “we couldn’t get funding” because the company was still too focused on civilian applications for its technology.
Employee revolts at Microsoft, Amazon and Google in the late 2010s helped keep those giants out of the military market. Google ended up relinquishing the Maven contract in 2018, with Palantir getting onboard in 2024.
Times have changed.
Investors and tech companies have “moved from being hostile to skeptical to neutral, from neutral to positive on the idea that Silicon Valley, like every other part of industry, has to support the warfighter,” Karp said.
Last year, private equity invested a record US$49 billion in defense technology companies, nearly twice 2024’s US$27 billion, PitchBook said.
That shift relates to the Russian invasion of Ukraine and concerns about China’s ambition toward Taiwan, Silicon Valley Defense Group chief operating officer Merritt Ogle said, which promotes closer ties between the two sectors.
“When you start to think about protecting democracy and protecting freedom and protecting things that I think a lot of the countries that are allied with the US appreciate,” she said, the concept that “all defense is bad becomes a harder argument to make.”
However, generative AI has raised concerns.
Anthropic has refused to allow its systems to be used by the Pentagon for mass surveillance, prompting the Trump administration to brand the trailblazing company a “supply chain risk” — even as Anthropic’s AI systems continue to be used for fighting in the Middle East.
Behind the shift has been a wider recognition among military and political leaders that the US “needs to tap into a broader innovation base for national security,” Mark Valentine, head of defense strategy at Skydio, a drone manufacturer, said.
Funding has never been an issue for the US Department of Defense, which has the world’s largest defense budget by far — US$962 billion for this fiscal year.
Almost all of that funding has historically gone to the usual major suppliers. For about a decade, under both Republican and Democratic administrations, the Pentagon has launched numerous initiatives to foster the development and adoption of new technologies.
“There’s a broader understanding that maintaining a technological edge depends on integrating the best capabilities and doing it faster than we have in the past,” Valentine said.
Several programs have been initiated to strengthen ties with the private sector and “the government has seemingly shown a lot more appetite to support earlier stage companies,” Drew Wandzilak, principal of the strategic tech fund at the private equity firm Alumni Ventures, said.
Broad use of drones and missiles in the Ukrainian conflict and the war with Iran has shown that having “the most expensive, most exquisite system was no longer a differentiator,” Wandzilak said.
“There’s competition on volume, there’s competition on capacity. And I think ultimately it’s a mix of the two.”
Ogle said that signals sent by the government had encouraged technology companies to envision military uses for their products.
“It has allowed Americans and people who work in this ecosystem to feel more excited about it, and more open to the idea that we’re not just making bullets here,” she said.
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