One of the biggest themes emerging in defense is a focus on scale. Advanced technology still matters, but the ability to produce and deploy capability quickly is just as important. This issue explores how that reality is reshaping investment, influencing procurement, and creating opportunities across the defense industrial base.

Something significant is happening in defense technology.

For years, the sector was largely dominated by a handful of traditional defense primes. Today, that landscape is changing. Fast-growing startups, software companies, and major technology firms are increasingly directing the future of national security.

The numbers tell the story.

Defense technology startups raised a record $49.1 billion in 2025, nearly double the $27.2 billion from the previous year. Momentum has continued into 2026, with $14.6 billion invested in the first few months alone, setting the stage for another record-breaking year.

This surge is being fueled by a combination of battlefield lessons, geopolitical competition, and changing investor attitudes.

The wars in Ukraine and the Middle East have provided real-world validation for autonomous systems, AI-enabled decision tools, electronic warfare, and low-cost drones. At the same time, governments around the world are increasing defense spending as competition between major powers intensifies. Investors who once avoided defense are now viewing the sector as both strategically important and commercially viable.

The biggest beneficiaries have been companies positioned at the intersection of software, autonomy, and defense.

Anduril has emerged as one of the sector's most prominent players, with valuations estimated at $30 billion to $60 billion while expanding into autonomous systems, AI, and defense platforms. Shield AI recently closed a funding round valuing the company at $12.7 billion, driven largely by demand for its Hivemind autonomy software. Companies such as Helsing, Saronic, Chaos Industries, and True Anomaly are also attracting significant attention from both investors and government customers.

But capital is only part of the story.

The real signal is coming from contract awards.

The Pentagon is increasingly embracing what many are calling "Neoprimes" — companies built around software, rapid iteration, and commercial technology. Anduril secured access to a potential $20 billion Army contract vehicle. Palantir continues to expand its footprint across multiple defense and intelligence programs. Meanwhile, the Department of Defense has signed major agreements with leading AI and cloud providers to bring advanced models into classified and operational environments.

This constitutes a larger shift away from decade-long development cycles and toward software-defined capabilities that can evolve continuously after deployment.

The opportunity is enormous, but so are the challenges.

Capital is abundant. Scaling production is not. Supply chains remain strained, autonomy continues to raise policy and ethical questions, and the ability to manufacture thousands of systems at speed remains largely unproven.

The next 12 to 18 months will be critical. The companies that can transition promising technologies into repeatable delivery will define the next generation of defense contractors.

The rest may discover that raising capital is much easier than becoming a lasting prime.

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The defense technology market is entering a new phase.

For the past several years, investors have rewarded growth, vision, and exposure to AI, autonomy, and emerging national security priorities. Over the next 18 to 24 months, the market will likely begin rewarding something far less exciting: execution.

That shift will separate future defense primes from companies that simply benefited from favorable market conditions.

The most likely outcome is a significant defense-tech IPO cycle beginning in late 2027 and accelerating into 2028. Anduril remains the clear frontrunner. Following its recent funding round and expanding manufacturing footprint, the company is increasingly being evaluated not as a startup, but as a potential prime contractor. If revenue growth continues and major programs convert into sustained production, an IPO valuation of $70 billion or more is achievable.

Shield AI appears positioned directly behind it. The company's future will largely depend on whether Hivemind evolves from a promising autonomy platform into a widely adopted operating layer across multiple defense programs. If successful, Shield could command software-like multiples rarely seen in traditional defense.

My forecast is that the market will become increasingly concentrated around companies capable of delivering three things simultaneously:

Very few firms currently possess all three.

The sector's largest risk is not funding. Capital is abundant.

The risk is production.

The capital problem has been solved, but the manufacturing problem remains. Building a prototype is one challenge; scaling annual production, meeting government requirements, maintaining margins, and sustaining supply chains is a different challenge altogether. Companies that fail to make this transition could face valuation resets, regardless of how much capital they have raised.

The most important trend to watch is the emergence of a new class of defense contractors. Not a traditional prime. Not a startup. Something in between.

By 2030,I expect at least one of today's defense-tech firms to sit alongside Lockheed Martin, RTX, Northrop Grumman, and General Dynamics as a major prime contractor. The companies that successfully bridge the gap between software innovation and industrial-scale delivery will define the next generation of the defense industrial base.

For investors, contractors, and technology leaders, that transition may prove to be the most important defense market story of the decade.

Everyone is talking about drones, autonomy, and AI.

Very few are talking about the problem that sits underneath all of them. Mass.

The Pentagon has realized that winning the next conflict will require more than advanced technology. It will require the ability to field thousands of affordable systems at a pace the defense industrial base has not achieved in decades.

That shift is already reshaping budgets, acquisition strategies, and procurement decisions.

Next Friday's Tip of the Spear Pro report:

Attritable Mass: The Race to Build Affordable Military Scale

Examines where this movement is headed and who stands to benefit.

We break down the programs, funding priorities, and manufacturing challenges driving the push toward low-cost missiles, autonomous systems, counter-drone platforms, and scalable defense production. More importantly, we identify where demand is forming and what it could mean for contractors, investors, and technology companies over the next decade.

The future of defense may not be determined by who builds the most advanced system.

It may be determined by who can build enough of them.

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