Palantir and Anduril join forces with tech groups to bid for Pentagon contracts

Unlock Editor’s Digest for free

FT Editor Roula Khalaf picks her favorite stories in this weekly newsletter.

Palantir and Anduril, two of the largest U.S. defense technology companies, are in talks with nearly a dozen rivals to form a consortium to jointly bid with the U.S. government to disrupt the country’s oligopoly of “major” contractors.

The consortium plans to announce agreements with a number of technology groups in early January. Companies participating in the talks include Elon Musk’s SpaceX, ChatGPT maker OpenAI, autonomous shipmaker Saronic and artificial intelligence data group Scale AI, according to multiple people with knowledge of the matter.

“We are working together to deliver the next generation of defense contractors,” said one person involved in the development of the group.

The movement sounds like this technology companies They are trying to wrest a larger share of the US government’s massive $850 billion defense budget from traditional prime contractors such as Lockheed Martin, Raytheon and Boeing.

The consortium will bring together some of Silicon Valley’s most valuable companies and use their products to provide the U.S. government with a more effective way to deliver cutting-edge defense and weapons capabilities, according to a second person involved.

It sounds like this defense technology start-ups Investors have pulled in record amounts of funds this year as they bet on more federal spending on national security, immigration and space exploration under Donald Trump’s new administration.

Wars in Ukraine and the Middle East and geopolitical tensions between the United States and China have increased the government’s confidence in technology companies developing advanced artificial intelligence products that can be used for military purposes and encouraged investors into the sector.

Palantir’s share price rose 300 percent last year, giving the company a market value of $169 billion; this figure is larger than Lockheed Martin. The data intelligence group was co-founded by tech investor Peter Thiel, who provided initial backing for Anduril, which launched in 2017 and was valued at $14 billion this year.

Meanwhile, SpaceX was valued at $350 billion this month, making it the world’s largest private start-up, and OpenAI’s value has risen to $157 billion since its founding in 2015.

Each of the companies tried to grab a share of the government’s defense budget. While SpaceX and Palantir won major public contracts as far back as two decades ago, some are newer to government contracts. OpenAI updated its terms of service this year to no longer explicitly prohibit the use of AI tools for military purposes.

U.S. defense procurement has long been criticized as slow and anti-competitive, with companies like Lockheed Martin, Raytheon and Boeing favoring a small number of decades-old tenders. These huge conglomerates produce ships, tanks and aircraft, which are often costly and take years to design and manufacture.

Silicon Valley’s burgeoning defense industry has prioritized producing smaller, cheaper, autonomous weapons that they claim will better protect the United States and its allies in a modern conflict.

A person involved in the development of the consortium described it as “aligning industry” with the goal of “delivering on the Department of Defense’s technical priorities” and “solving critical software capability issues.”

An agreement has been reached on some connections between the technology groups expected to take part in the consortium and integration work will begin immediately.

Palantir’s “Artificial Intelligence Platform,” which provides cloud-based data processing, was integrated with Anduril’s autonomous software “Lattice” this month to deliver artificial intelligence for national security purposes.

Similarly, Anduril has combined anti-drone defense systems with OpenAI’s advanced artificial intelligence models to collaborate on US government contracts related to “aerial threats.”

Anduril and OpenAI’s joint statement about this partnership stated that “it aims to provide the US Department of Defense and the intelligence community with access to the most advanced, effective and secure artificial intelligence-driven technologies available in the world.”

Anduril, OpenAI and Scale AI declined to comment on the consortium’s development. Palantir, SpaceX and Saronic did not respond to requests for comment.