Silicon Valley firms are forming a group to win more US defense contracts, report says

Palantir, led by CEO Alex Karp, and Anduril have reportedly led talks with OpenAI, SpaceX, and others about forming a group to win defense contracts.

Defense tech firms Palantir and Anduril are in talks with Elon Musk’s SpaceX, Sam Altman’s OpenAI, and others to form a new group in Silicon Valley to bid for Washington’s lucrative defense contracts, according to a new report.

Palantir and Anduril, some of Silicon Valley’s most notable defense companies, have held discussions with around a dozen firms to create a group that can take a larger share of the US government’s roughly $850 billion defense budget, the Financial Times reported Sunday.

The group, which could announce strategic partnerships next month, would seek to bring Silicon Valley-style disruption to an industry dominated by so-called “prime” contractors, such as Lockheed Martin and Raytheon.

Musk, who is leading a newly formed Department of Government Efficiency under the direction of President-elect Donald Trump, used X last month to criticize Lockheed Martin’s crewed F-35 fighter jets. He has previously advocated for autonomous drones.

The F-35 design was broken at the requirements level, because it was required to be too many things to too many people.

This made it an expensive & complex jack of all trades, master of none. Success was never in the set of possible outcomes.

And manned fighter jets are… https://t.co/t6EYLWNegI

— Elon Musk (@elonmusk) November 25, 2024

“We are working together to provide a new generation of defense contractors,” one person close to the group told the Financial Times. Others involved in the group include A16z–backed startup Saronic and AI data firm Scale AI, the report said. The consortium could announce agreements with some tech firms as soon as January, the report said.

The move to form a group involving rival firms would mark one of the most coordinated efforts in Silicon Valley yet to edge further into the defense sector and shake-up a system that tech leaders have criticized for being too slow to adopt new technologies.

Palantir, cofounded in 2003 by Silicon Valley billionaire Peter Thiel, has previously won several government contracts. In May, the Pentagon awarded the firm a $480 million contract to use its data analytics platform on Project Maven, an AI tool for analyzing battlefield data.

Discussing his new book in a conversation with investor Stanley Druckenmiller at JPMorgan’s Asset Managers CEO Forum this month, Palantir CEO Alex Karp argued that Silicon Valley needs to work more closely with the US government.

Defense startup Anduril, founded by Palmer Luckey — the tech mogul who founded and sold virtual reality startup Oculus to Meta — has also won contracts for its autonomous and air defense systems.

Palantir, Anduril, SpaceX, Saronic, Scale AI, and OpenAI did not immediately respond to B-17’s request for comment outside regular working hours.