Defense Startups Are Riding High

Defense is the best offense for startups.

Military tech startups are seeing a big boost in their valuations of late, spurred in part by former President Trump’s re-election and Russia’s war in Ukraine. Palantir, a frequent contractor for US Immigration and Customs Enforcement, has now surpassed Lockheed Martin in market cap. Defense startup Anduril is also well-positioned to benefit from the incoming administration, and it’s not just US startups making hay.

All’s Fair

Palantir saw its share price shoot up 50% after the US election result. The company was co-founded by Peter Thiel, the conservative Silicon Valley mega-investor; and while his relationship with Trump has gone through some peaks and troughs, Thiel appeared to warm to Trump’s second bid after he chose JD Vance as his running-mate. Investors are betting that Palantir will be in line for even more government contracts come January, according to a Financial Times report. The same holds true for Anduril which is headed up by Palmer Luckey, the man who sold his VR Oculus to Meta for $2 billion and is a staunch supporter of Trump.

Non-Trump-adjacent defense startups are also getting boosts. On Wednesday, The Wall Street Journal reported a little-known Utah-based drone supplier called Teal Drones bagged itself a contract with the US military, and investments in defense tech are ticking up across the Atlantic:

• Investment management firm VanEck’s defense ETF is up over 46% year-to-date, outperforming both the S&P 500 (up 24%) and the Nasdaq (41%).
• Portuguese drone startup Tekever netted a €70 million ($74 million) cash injection from backers including NATO’s VC fund on Wednesday. While European VC tech funding overall has been falling over the past couple of years, funding for defense tech firms specifically has grown.

Cold War Re-Run: Ukraine fired US missiles into Russia for the first time earlier this week, and Putin’s resulting displeasure gave global markets a bit of a shake. The US and many European nations shut their embassies in Kyiv on Wednesday, citing the threat of a significant aerial attack from Russia.