Mines, Missiles, Robots: One Year of JPMorgan’s $1.5 Trillion Bet on National Security

When JPMorgan Chase last year announced a massive plan to finance and invest in US economic and national security projects and companies, CEO Jamie Dimon made clear its ambitions were “100% commercial.”

This was no philanthropy or political whim. While in the national interest, the bankers running the initiative still pledge allegiance to FV=PV(1+i)ⁿ , the formula for future value of an investment. On Monday, JPMorgan announced that the financing and equity investments in critical US industries is off and running at a brisk pace.

Stakes Are Back on the Menu

Putting billions directly into startups is both a departure and a return to form for JPMorgan, which these days typically stays in its advisor-lender lane. In 2014, the bank bowed out of taking direct stakes in growth companies when it spun off private equity unit One Equity Partners.

All it took to convince CEO Jamie Dimon to get back in the game was an alarming, generational outbreak of global macro risks to national security, among them wars in Ukraine and the Middle East and US overreliance on China for critical minerals. And so, last year, he announced a $1.5 trillion, 10-year plan to provide traditional financing to industries critical to economic and national security. On Monday, JPMorgan said this Security and Resiliency Initiative had financed $230 billion worth of projects in its first year.

Within the larger initiative, the bank is directly investing $10 billion in US-based startups. The rationale is these bets will have less speculative exposure than most venture capital, even if they are riskier than corporate lending, because of the strategic areas where the companies operate. JPMorgan also poached Todd Combs, one of Warren Buffett’s top portfolio managers, from Berkshire Hathaway in January to oversee the investments. Ten months later, at least half of the initial commitment has been deployed. The deals that have been made public paint a clear picture:

• In August, JPMorgan was the co-lead in a $1.4 billion funding round for Hadrian, which builds automated defense, aerospace and maritime factories where robots outnumber humans by as much as 10-to-1 and which says it can make rocket and jet parts 10 times faster than legacy manufacturers. The market opportunity is pretty obvious: The US defense industrial base is struggling to keep up with demand, already facing a $900 billion backlog.
• The bank also took part in a $1 billion August funding round for Castelion, a company that manufactures low-cost, long-range hypersonic missiles called Blackbeard. The opportunity, once again, is conspicuous: Independent defense assessments have found the US military is facing a shortage of advanced long-range offensive missiles that, along with interceptor shortages, will take years to replenish.

The Agony and the Antimony: One of the very first investments the Security and Resiliency Initiative made after launching last year was in Perpetua Resources, which is developing the Stibnite Gold Project in Idaho to mine gold, silver and antimony. Antimony is a crucial, irreplaceable component in military hardware, and the US relies on China for two thirds of its antimony oxide supply, according to the U.S. Geological Survey. Beijing has not hesitated to use this in trade standoffs, putting the defense supply chain at risk.