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

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Palantir and Anduril, two of the largest US defence technology companies, are in talks with about a dozen competitors to form a consortium that will jointly bid for US government work in an effort to disrupt the country’s oligopoly of “prime” contractors.

The consortium is planning to announce as early as January that it has reached agreements with a number of tech groups. Companies in talks to join include Elon Musk’s SpaceX, ChatGPT maker OpenAI, autonomous shipbuilder Saronic, and artificial intelligence data group Scale AI, according to several people with knowledge of the matter.

“We are working together to provide a new generation of defence contractors,” said one person involved in developing the group.

The move comes as tech companies seek to grab a bigger slice of the US government’s huge $850bn defence budget from traditional prime contractors such as Lockheed Martin, Raytheon and Boeing.

The consortium will bring together the heft of some of Silicon Valley’s most valuable companies and will leverage their products to provide a more efficient way of supplying the US government with cutting-edge defence and weapons capabilities, according to a second person involved.

It comes as defence tech start-ups have attracted record amounts of funding this year, as investors bet they will be among the winners of higher federal spending on national security, immigration and space exploration under Donald Trump’s incoming government.

Wars in Ukraine and the Middle East and geopolitical tensions between the US and China have heightened the government’s reliance on tech companies developing advanced AI products that can be used for military purposes, and encouraged investors to the sector.

Palantir’s share price has skyrocketed by 300 per cent in the past year, giving the company a market capitalisation of $169bn — larger than Lockheed Martin. The data intelligence group was co-founded by tech investor Peter Thiel, who also provided the initial backing for Anduril, which launched in 2017 and was this year valued at $14bn.

Meanwhile, SpaceX was valued at $350bn this month, making it the world’s largest private start-up, and OpenAI has soared to a valuation of $157bn since it was founded in 2015.

Each of the companies has attempted to grab a slice of the government’s defence budget. While SpaceX and Palantir have won large public contracts going back two decades, some are newer to government procurement. OpenAI updated its terms of service this year to no longer explicitly prohibit the use of its AI tools for military purposes.

US defence procurement has long been criticised as slow and anti-competitive, favouring a small number of decades-old primes, such as Lockheed Martin, Raytheon and Boeing. These vast conglomerates typically produce ships, tanks and aircraft that are costly and take years to design and manufacture.

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

One person involved in developing the consortium described it as “aligning industry” in order to “execute the technical priorities of the Department of Defense” and “solve critical software capability problems”.

Some tie-ups between the tech groups expected to be in the consortium have already been agreed and integration work will begin immediately.

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

Similarly, Anduril combined its counter-drone defence systems with OpenAI’s advanced AI models to jointly work on US government contracts related to “aerial threats”.

A joint statement from Anduril and OpenAI about that partnership said it “aims to ensure that the US Department of Defense and intelligence community have access to the most advanced, effective, and safe AI-driven technologies available in the world”.

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