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Artificial intelligence start-up Shield AI will nearly double its valuation to $5bn in a new fundraising round, as investors race to fund defence technology groups producing cutting-edge military systems.
The San Diego-based group, which makes AI-powered software for autonomous aircraft and drones, is raising around $200mn from defence and aerospace companies set to include Palantir, Airbus and L3 Harris, according to people close to the deal. Venture capitalists including Andreessen Horowitz, Point72 and Riot Ventures are also expected to participate, they added.
The fundraising will boost Shield’s valuation from the $2.8bn it enjoyed a year ago amid a flood of investor appetite for companies likely to benefit from higher federal spending on national security under Donald Trump’s incoming government.
Wars in Ukraine and the Middle East and geopolitical tensions between the US and China have also heightened Washington’s reliance on tech companies developing advanced AI products that can be used for military purposes.
Shield’s core “Hivemind” software enables drones and aircraft to operate without GPS, communications or a human pilot. Its autonomous technology is being used by a number of rival companies, including legacy defence prime contractors that can incorporate its software into their aircraft.
“Companies invest in competitors when there’s a strong strategic rationale to do so,” said one of the people close to the matter. The investments are a sign of the “serious commitment to use our autonomy backbone in their programmes”, they added.
Shield declined to comment. Palantir, Airbus, L3 Harris, Andreessen Horowitz, Point72 and Riot Ventures did not immediately respond to requests for comment.
The fundraising comes as tech groups are seeking to grab a bigger slice of the US government’s $850bn defence budget from traditional prime contractors such as Lockheed Martin, Raytheon and Boeing.
The Financial Times revealed last month that 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 pitch for defence contracts. Shield AI is among the companies lined up to be part of the consortium.
Groups including Palantir, SpaceX, Anduril and OpenAI have in some cases integrated systems to leverage their technology in order to more rapidly advance America’s military capabilities.
Pete Hegseth, Trump’s defence secretary pick, on Tuesday emphasised the need to speed up weapons development through competition and innovation.
During his Senate confirmation hearing, he praised Silicon Valley, saying that it “for the first time in generations, has shown a willingness, desire and capability to bring its best technologies to bear at the Pentagon”.
Investors have been quick to back Silicon Valley’s burgeoning defence industry. Palantir’s share price has soared 330 per cent in the past year, valuing it at over $160bn.
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 valued at $14bn last year.
