WASHINGTON — SpaceX in just a few years upended the military launch business, capturing contracts that were once the exclusive domain of United Launch Alliance, the Boeing-Lockheed joint venture. Now, as a new wave of commercial tech firms pushes into the defense sector, industry executives see an opportunity for Silicon Valley’s biggest players to challenge traditional prime contractors across defense and space programs.
The shifting business landscape under the Trump administration was a major topic discussed March 5 at the National Security Innovation Base Summit organized by the Ronald Reagan Institute.
With dominant commercial players like SpaceX, Palantir, and Anduril — led by figures with close ties to the White House — gaining influence, some wondered whether commercial firms are on a path to become the new primes.
Joe Lonsdale, venture capitalist and co-founder of Palantir, acknowledged that while Silicon Valley tech firms are gaining ground, they remain far from toppling incumbents such as Lockheed Martin, Boeing, and Northrop Grumman.
“This is really a question for 10 or 20 years from now,” said Lonsdale, who is also the founder and managing partner of 8VC, an early-stage venture capital firm. He was an early investor in Anduril and other defense-focused startups.
Processes still too complex
The procurement process, Lonsdale noted, remains too complex for most commercial firms to navigate easily. Even a simple piece of military equipment comes with hundreds of pages of technical specifications, creating significant barriers to entry.
According to a recent report by the Financial Times, Palantir and Anduril are in talks with companies including SpaceX, OpenAI, Saronic, and Scale AI to form a consortium aimed at bidding on Pentagon contracts. The goal: to provide more efficient and cost-effective solutions compared to traditional defense programs.
But for commercial firms to gain substantial ground, Lonsdale argued, “the processes have to be transparent and open and fair. And if Anduril and Palantir are gonna win because they have the best product, I think that’s fair.”
Anduril, founded by Oculus co-creator Palmer Luckey, has built battlefield-ready AI-powered surveillance systems that the Pentagon has eagerly adopted. The company is focused on the mass manufacturing of autonomous drones and munitions and is also eyeing the military space market, exploring the development of proliferated space sensor networks to enhance real-time battlefield awareness and threat detection.
Palantir, long a vocal critic of the traditional procurement process, has successfully wrested major data analytics contracts from legacy firms.
But Lonsdale noted that technological prowess alone is not enough. The defense industry is as much about bureaucratic navigation as it is about innovation. Some of today’s major defense firms may have started out trying to operate like commercial businesses, but over time they became bureaucratic and captured the market by basically operating like an arm of the government, he said. “I think that’s actually not great, and that’s how it works right now. So I think we need some reform there.”
Challenges for defense industrial base
Christian Brose, president and chief strategy officer of Anduril Industries, echoed those concerns, saying that as the U.S. military seeks to modernize, demand will rise for artificial intelligence, autonomous systems, and other capabilities where commercial tech firms excel. Yet, the Department of Defense remains heavily reliant on the traditional defense industrial base, which maintains highly specialized suppliers and workforces that make them difficult to displace outright.
Brose pointed to challenges within the current defense industrial base, including its reliance on unique supply chains, specialized workforces, and critical minerals sourced from other countries. Companies like Anduril, he said, are actively working to eliminate those dependencies.
There’s an opportunity for the Pentagon to leverage commercial supply chains and reduce its dependence on scarce assets, Brose said. “It’s outside of the traditional industrial base where you really see incredibly resilient commercial supply chains” that could help meet defense needs.
Brose argued that the Pentagon has the tools and funding needed to innovate but it takes strong leadership to drive meaningful change. “You have plenty of incredibly well-meaning people in the bureaucracy who absolutely know what the problem is, but they don’t have the authority to fix it,” he said.
He cited former Air Force Secretary Frank Kendall as an example of a senior leader who successfully pushed through procurement reforms. Under Kendall, the Air Force realigned $5 billion in its budget to fund an autonomous, AI-driven drone program to complement manned fighter jets. Instead of following the traditional, decades-long defense acquisition cycle, the Air Force used rapid prototyping and commercial partnerships to produce these drones faster.
