Carlyle Group Reportedly Pitching Defense Fund

Geopolitical conflict often doesn’t make sense, but it does make dollars.

Private equity giant Carlyle Group is pitching investors on a defense-focused fund aimed at capitalizing on governments’ plans to upgrade and overhaul their armed forces, Bloomberg reported Monday.

Corporate Cadets

Allies on both sides of the Atlantic have committed billions to upgrade military infrastructure over the past several years, and there’s plenty more where that came from. President Donald Trump said he plans to request $1.5 trillion for the Pentagon’s 2027 budget later this week, a 50% increase. Meanwhile, the $574 billion spent by NATO’s European members and Canada on core defense last year represented a 20% increase from 2024, according to the alliance’s annual report. All 32 NATO members have pledged to increase defense spending to 5% of GDP by 2035, an endeavour that will cost hundreds of billions of dollars. 

Carlyle isn’t the only one looking to cash in. Rival Warburg Pincus has also been considering a defense-focused fund. And buyout shops are all over the sector:

• When defense tech startup Shield AI announced a $2 billion funding round last week, private equity firm Advent International served as lead investor while Blackstone-managed funds committed $500 million ⁠in preferred equity. AEVEX, another defense tech contractor with backing from Madison Dearborn Partners, filed last week for an initial public offering.
• Last October, US Army Secretary Daniel Driscoll and Treasury Secretary Scott Bessent met with top private equity groups including Apollo, Carlyle, Cerberus and KKR to pitch them on funding a $150 billion infrastructure refresh. The US Army is also seeking public-private partnership pitches in areas including energy and manufacturing.

Getting Results: As it happens, one idea discussed at the October meeting was having private capital firms build data centers at army facilities and lease them to the government. Demand for computing power has grown exponentially as forces increase their use of AI. Last week, the Army announced it had picked Carlyle and CyrusOne, which is held by BlackRock and KKR-managed funds, to do just that, with each set to build a $2 billion data center in Texas and Utah, respectively.