Trump and the Silicon Valley, Loans for Critical Technology, and Unrealistic Techno-Enthusiasts

Donald Trump was elected last week, and defence tech startups in Silicon Valley are excited. Elon Musk and Palmer Luckey supported Trump’s campaign and as many in Silicon Valley, they believe that Trump will shift the focus to software-driven weapons.

The US Defence Department has authorized the Office of Strategic Capital to issue loans for critical technologies.

But first, William D. Hartung, a senior research fellow at the Quincy Institute for Responsible Statecraft, thinks that the Pentagon and Silicon Valley are unrealistic:

The Big Story

Trump, Musk, and the Silicon Valley

Silicon Valley, with its ambitions to make weapons and secure large contracts, is excited about the upcoming Trump administration.

On Wednesday last week, Palantir shares soared by 8.61%, extending a 29% spike five days earlier. On X, the company said it “stands ready to work with Trump to bring the software revolution to our most important institutions.”

“Trump [..] very much wants to balance the budget and save money, get more for less,” said Anduril co-founder Palmer Luckey, who hosted a fundraiser for Trump and donated to the Republicans.

With Elon Musk’s growing influence on Trump, there are speculations that he might take on a government role. Last Wednesday, he even joined a call between Trump and the Ukrainian President Volodymyr Zelensky. Commenting on Luckey on X, Musk wrote that it is “very important to open DoD/Intel to entrepreneurial companies like Anduril. Pay for outcomes, not requirements documents!”

Nathan Mintz, CEO of electronic warfare company CX2 and former cofounder of unicorn defence company Epirus, said that “the close relationships between Vance, Eleon, and the defence VC and startup ecosystem will create a huge opening for real defence acquisition reform and widening of the number of players.”

Other Silicon Valley leaders have also aligned themselves with Trump: Marc Andreessen, whose eponymous venture firm invests in defence tech startups through its American Dynamisms fund, has advocated for Trump; Jacob Helberg, advisor to Palantir, advised Trump on AI policy; Joe Lonsdale of 8 VC and Shaun Maguire, Sequoia have shown support, too.

The hope is that Trump will upend and reallocate the $800 billion Department of Defense budget, much of which currently goes to large prime contractors such as Lockheed Martin, Northrop Grumman, and RTX.

But there are also downsides. Trump has talked about ending his support for Ukraine which would cause problems for startups such as Shield AI and Skydio that have secured contracts there.

In Europe, Trump’s victory is causing uncertainty. Many believe that fewer non-US companies will get contracts with the US defence, which is today the main source of income for many defence startups in Europe. There are also concerns that Trump would cut NATO budgets, severely impacting the defence tech ecosystem in Europe. Today, the US accounts for the majority of NATO’s budget.

DOD Loans for Critical Technology

In 2022, the US Defense Department announced the Office of Strategic Capital, or OSC, to ensure that critical technologies get the funding for product development and production. These technologies often have dual use: they have both military and civilian applications.

Some of the most important technology areas for national security include energy, advanced materials and quantum science.

“OSC was developed to incentivize industry to reinvest or expand their investment in many of these capital-intensive technology areas,” said Jason Rathje, director of the OSC, at a webcast by the Center for Strategic and International Studies this week.

Last year, OSC was authorized to lend to the DOD. It now has the unique authority to grant and guarantee loans to support its mission to enable the industry to scale up production and generate revenue. Rathje gave the example of an investment in next-generation semiconductors, where investments are low due to the time needed to go from research and development to production and profitability.

*Jason Rathje. Source: US Defense Department*

In the News

China to Unveil J-35 Jet Built with Stolen U.S. Tech

China is set to debut its J-35 stealth fighter jet, allegedly developed using stolen U.S. military technology, at the Zhuhai Air Show. The J-35, described as a medium-weight, multi-role stealth aircraft, will be used on China’s aircraft carriers, complementing the existing J-20 stealth jet. U.S. officials have expressed concerns over China’s rapid development of advanced military aviation, citing risks to global security and the importance of safeguarding technological secrets.
Read more at Washington Times.

French Navy Prioritises Underwater Combat with New UCUV

The French Navy unveiled its Unmanned Combat Underwater Vehicle (UCUV) at Euronaval 2024, showcasing advanced AI-powered autonomy for underwater missions. The UCUV, developed under the 2024–2030 Military Programming Law, features stealth, endurance, and modular capabilities, enabling long-term operations without human intervention. This innovation represents a leap in underwater combat technology, addressing emerging naval threats and enhancing France’s strategic maritime security.
Read more at Naval News.

Fourteen UN Draft Resolutions Address Military AI and Global Security

The UN First Committee approved 14 draft resolutions, including one focusing on artificial intelligence in the military domain. The resolution urges international cooperation to mitigate risks like arms races and the proliferation of AI to non-state actors. It emphasises ethical considerations and encourages member states to exchange knowledge on responsible AI use. The initiative highlights global concerns over AI’s impact on conflict escalation and international security.
Read more at the UN.

Rheinmetall on Track for Record Sales Amid Rising European Defence Spending

Germany’s Rheinmetall AG is experiencing unprecedented growth, with orders nearly doubling to €21 billion, driven by increased European defence spending due to the Ukraine war. The company anticipates reaching €10 billion in annual sales for the first time in 2024, bolstered by its leadership in ammunition production and global expansion efforts. CEO Armin Papperger has outlined plans to double sales within a few years, positioning Rheinmetall as a leader in the global defence industry.
Read more at Reuters.

How One Startup Hopes to Crack Defence Tech by Selling Jetpacks to the Military

Gravity Industries, a UK-based start-up, is developing jetpacks with contracts worth tens of millions with armed forces, including a potential deal with the Netherlands military. The jetpacks, capable of speeds up to 85 mph and altitudes of 6,000 feet, are being pitched for military operations like ship boarding. While primarily funded by private investors, Gravity aims to expand its military applications and explore civilian uses, such as mountain rescue. The company highlights challenges in navigating military procurement but sees growing investor interest in defence tech.
Read more at Stifted.

Saab’s Autonomous Swarm Technology Used in Landmark AUKUS Trial

Saab’s autonomous swarm technology played a key role in the AUKUS trials, demonstrating AI-enabled interoperability for uncrewed aerial systems (UAS). The trial highlighted the ability to integrate and “hot-swap” AI systems from multiple suppliers, enabling a single operator to control diverse UAS swarms. This marks a significant step in developing networked, multi-domain capabilities crucial for modern warfare. The trial builds on decades of research by Saab and the UK’s Defence Science and Technology Laboratory (Dstl).
Read more at Saab.

Ukraine to Test New Air Defence Missile from Estonian Company Frankenburg Technologies

Ukraine will begin testing a new air defence missile developed by Estonian company Frankenburg Technologies. These missiles are designed to counter UAV threats and engage targets at altitudes up to 2 km. The tests, supported by discussions for potential local production in Ukraine, align with Kyiv’s efforts to strengthen its air defence capabilities. Brigadier General Anatolii Klochko emphasised the importance of testing modern weaponry in active combat conditions.
Read more at Defence Industry Europe.

Tongogara Child Refugees Find Solace in Digital Service

The Tongogara Refugee Settlement in Zimbabwe, home to refugees from the DRC, Rwanda, and Burundi, has implemented digital services to help reunite separated families. Facilities provided by the Zimbabwe Red Cross Society, supported by the ICRC, enable refugees to access online communication tools and store vital documents digitally. Success stories include the reunification of children with their families, highlighting the transformative impact of these digital services in addressing family separation caused by conflict.
Read more at The Standard.