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Two of the largest U.S. defense technology companies, Palantir and Anduril, are in talks with about a dozen rivals to form a consortium to jointly bid for U.S. government projects in an effort to break the country’s oligopoly of “prime” contractors.
The alliance plans to announce agreements with several technology groups as early as January. Companies in talks to join include Elon Musk’s SpaceX, ChatGPT maker OpenAI, autonomous shipbuilder Saronic and artificial intelligence data group Scale AI, according to multiple people familiar with the matter.
“We are working together to deliver a new generation of defense contractors,” said one person involved in the team’s development.
The move comes as technology companies seek to get a bigger share of the U.S. government’s massive $850 billion defense budget from traditional prime contractors such as Lockheed Martin Corp., Raytheon Co. and Boeing Co.
Another person involved said the consortium will bring together the power of some of Silicon Valley’s most valuable companies and will leverage their products to provide a more efficient way to provide the U.S. government with cutting-edge defense and weapons capabilities.
It comes as defense tech startups have attracted record amounts of funding this year, with investors betting they will be key to federal spending on national security, immigration and space exploration under Donald Trump’s incoming administration One of the added winners.
Wars in Ukraine and the Middle East and geopolitical tensions between China and the United States have increased governments’ reliance on technology companies developing advanced artificial intelligence products that can be used for military purposes and encouraged investors to enter the industry.
Palantir’s stock price has soared 300% in the past year, giving the company a market value of $169 billion, surpassing Lockheed Martin. The data intelligence group was co-founded by tech investor Peter Thiel, who also provided initial backing for Anduril, which launched in 2017 and was valued at $14 billion this year.
Meanwhile, SpaceX reached a valuation of US$350 billion this month, becoming the world’s largest private startup, while OpenAI’s valuation has soared to US$157 billion since its founding in 2015.
Each company is trying to get a piece of the government’s defense budget. While SpaceX and Palantir have won large public contracts two decades ago, some of them are new to the world of government procurement. OpenAI updated its terms of service this year to no longer explicitly prohibit the use of its artificial intelligence tools for military purposes.
U.S. defense procurement has long been criticized as slow and anti-competitive, favoring a handful of decades-old incumbents such as Lockheed Martin, Raytheon and Boeing. These large conglomerates often produce ships, tanks and aircraft that are expensive and take years to design and build.
Silicon Valley’s booming defense industry has prioritized the production of smaller, cheaper autonomous weapons that they claim will better protect the United States and its allies in modern conflicts.
One person involved in developing the alliance described it as “coordinating industry” to “execute DoD’s technology priorities” and “address critical software capability issues.”
It is expected that some collaborations between the technology groups joining the alliance have already been agreed and integration work will begin immediately.
Palantir’s “artificial intelligence platform” provides cloud-based data processing and this month integrated with Anduril’s autonomous software “Lattice” to provide artificial intelligence for national security purposes.
Likewise, Anduril is combining its anti-drone defense system with OpenAI’s advanced artificial intelligence models to work on U.S. government contracts related to “aerial threats.”
A joint statement from Anduril and OpenAI about the partnership said it “aims to ensure that the U.S. Department of Defense and the Intelligence Community have access to the world’s most advanced, effective and secure artificial intelligence-driven technologies.”
Anduril, OpenAI and Scale AI declined to comment on the alliance’s development. Palantir, SpaceX and Saronic did not respond to requests for comment.
