Decades of established American policy have been upended in the four months since Donald Trump returned to the White House. An axe-swinging Elon Musk has aimed to dismantle the federal bureaucracy, while Trump has pushed the limits of executive power. For many in Washington, it is a gloomy time, with organizational funding cut, ideologies overturned, and an unpredictable president at the helm. Yet, the offices of upstart defense-tech contractors are abuzz: the new Trump administration has sent their prospects soaring.
Silicon Valley once shunned the defense market. For instance, Project Maven, a 2018 effort to enlist Google programming talent to military ends, was quietly shut down amid employees’ protests. Venture-capital funding for military firms was once scarce. Now, though, many of the hottest Silicon Valley startups sell to the military. Foremost among them is Palantir Technologies, a company that provides AI and data analytics to spy agencies that reportedly include the CIA and NSA. Its market value has shot up to almost $300bn since the start of the Trump presidency. SpaceX, Elon Musk’s satellite firm, handles government rocket contracts and is valued at $350bn: both it and Palantir have overtaken established giants like Lockheed Martin and Raytheon Technologies in market value. A wealth of smaller upstarts, like Anduril Industries and Shield AI, are snapping at their heels.
These firms claim to bring the tech mindset to the stodgy world of government contracts. Anduril, for instance, was founded by the Hawaiian-shirted Palmer Luckey, who created the Oculus VR headset company as a teenager before he was bought out by Facebook for $2bn in 2014. Rather than bidding for government tenders, Anduril releases products like a private company: in anticipation of demand. These are snappily branded with names like Roadrunner (a drone interceptor, pictured alongside Luckey) and Barracuda (a cruise missile), and promoted with slickly-produced videos, some in anime cartoon style. They have won hundreds of millions of dollars in contracts, especially in border security and drone defense.
Fantastical though these companies may seem (Anduril and Palantir are both ‘Lord of the Rings’ references), and boosted though they may have been by the revolutionary fervor of the Trump administration, defense-tech startups are targeting a real gap in the United States’ capabilities. The war in Ukraine has seen million-dollar tanks (both Russian and American-supplied) destroyed by drones that cost a few thousand dollars and which any tech-savvy teen could assemble at home. Indeed, this has led the Marine Corps to scrap its 450 tanks. In contrast to the years-long procurement cycles of the U.S. military, Ukrainian forces have come to rely on an army of tinkerers who develop new weapons systems in weeks. That is a pace of development that the trillion-dollar bureaucracy of the U.S. Department of Defense, and the five lumbering arms-makers at the heart of the U.S. defense ecosystem, cannot match.
Anduril, Palantir, and their ilk want to change this. For instance, Anduril’s electronic-warfare turret (intimidatingly named Menace) ships software updates to the Ukrainian front lines every evening, as new threats emerge. Palantir recently won a NATO contract in record time – six months for the tender to be awarded. Encouraging though these developments are, however, these companies are at risk of occupying a useless middle ground — one in which their systems are too expensive to match Ukrainian bargain-basement systems for disposability, but too cheap to rival established counterparts’ for performance. For instance, Anduril’s Roadrunner is reported to cost $120,000 per unit — petty change by U.S. military standards, but no match for the makeshift Ukrainian solution of a shotgun zip-tied to a cheap toy drone. Indeed, Anduril hardware has received mixed reviews from the battlefield in Ukraine (though its software is, by all accounts, top-notch).
The problem seems to lie not in these companies’ expertise — their technical chops are formidable, as Luckey’s Oculus experience demonstrates — but in the U.S. government’s purchasing restrictions. Military hardware is subject to intense quality-control requirements – according to a 2003 report, over 28,300 separate regulations – that ensure military systems are reliable. To a certain extent, these are sensible: a nuclear missile that blows up in its silo is worse than useless. Yet, applying the same standards uniformly, especially to small unmanned equipment like drones, risks inflating the cost of equipment that should be disposable. Sidestepping professionalized military production in favor of 3D-printers and hobbyist labs is part of what has allowed Ukraine to vastly outperform expectations on the battlefield. Allowing American contractors more leeway to roll out cheaper, less reliable products faster would help U.S. forces match the agility of competitors.
However, the prospect of a warfighting environment in which the air is thick with cheap, simple, easy-to-produce drones raises the question: where lies the United States’ competitive advantage? The U.S. used to have an advantage in precision munitions, but drones have made accurate guidance cheaper and more abundant. The United States is not the world leader in scale: China has the most established drone industry. One possible answer is artificial intelligence (AI): integrating hardware and software is an area in which American tech companies lead. Given the software excellence of the new wave of defense startups and promising attempts at AI targeting in Ukraine, it seems likely that companies like Anduril will seek to push AI as the United States’ competitive edge.
If the Pentagon under the new Trump administration (Trump having historically been gung-ho when it comes to military spending) plays its cards right and invests in companies like Anduril, cheap, semi-autonomous lethal drones may become a standard part of the U.S. arsenal as the age of million-dollar blockbuster equipment fades. Trump must see that he builds new military capabilities, not just defund outdated ones. If the U.S. fails to invest in the new technology that is its greatest competitive advantage, the United States’ military edge may go the way of the Marines’ 450 tanks: to the scrapyard.
