Pentagon poured $53 billion into tech companies; backing AI innovations
What's the story
The Pentagon is significantly investing in Big Tech and emerging Silicon Valley companies, specifically targeting artificial intelligence (AI) innovations.
A study by Brown University's "Costs of War" project reveals that between 2019 and 2022, the Department of Defense and US intelligence communities, awarded contracts totaling $53 billion to top tech firms.
The report's author, Roberto J. González, states that these sectors "routinely award multiyear contracts to major tech firms" to develop AI-driven military technologies, and utilize cloud computing services.
Historic ties
Pentagon's financial support shapes Silicon Valley
Silicon Valley, known for its major chip manufacturers, computer firms, software developers, and AI start-ups, owes its origin to the Pentagon's financial backing during the Cold War era in the 1950s and 60s.
However, González notes that modern Pentagon spending is directed toward a new generation of defense contractors, "a combination of gargantuan tech firms ... and hundreds of smaller start-up companies supported by VC firms."
This shift signifies a change in relationship between the military sector and technology industry.
Significant deals
Major contracts with tech giants
One notable contract is the National Security Agency (NSA)'s $10 billion agreement with Amazon, spanning five years from 2021.
This deal, known as "Wild and Stormy," aims to transfer the agency's intelligence and surveillance data onto Amazon's cloud platform.
González highlights that these long-term contracts primarily offer "software as a service" rather than hardware/equipment, potentially increasing the Pentagon and Central Intelligence Agency (CIA)'s reliance on private sector technical specialists.
Start-up support
Start-ups reap benefits from military funding
Start-ups are also reaping the benefits of substantial military funding.
For instance, AI firm Palantir has secured contracts with several US agencies including the NSA, CIA, Federal Bureau of Investigation (FBI), Marine Corps, Air Force, and Special Operations Command.
In 2020 alone, Palantir received $800 million from the US military. Additionally, over half of the company's revenue comes from the US government.
This trend underscores the growing importance of AI and tech start-ups in defense contracting.
Financial statistics
Take a look at the funding figures
According to González, the total worth of contract ceilings set by US military and intelligence agencies, in collaboration with leading tech companies from 2019 to 2022 was around $53 billion.
The sum awarded by the Pentagon and the US intelligence community to Microsoft, Amazon, and Google from 2018 to 2022, stands at $28 billion.
Venture capital funding directed toward defense technology start-ups totaled $100 billion from 2021 to 2023.
Strategic capital
Pentagon's new initiative to link start-ups and capital
In a recent development, the Defense Department launched the Office of Strategic Capital (OSC) in December 2022.
The OSC is an initiative designed to connect AI and other start-ups with private capital sources.
According to its website, "OSC aims to use the United States' comparative advantages in capital markets and economic competition to crowd in capital for the critical technology supply chains needed by the Department of Defense."
This move further illustrates the Pentagon's commitment to fostering tech innovation.