Silicon Valley's $4 Billion Defense Manufacturing Bet: A New Era of Rapid Production.

Silicon Valley startups are investing $4 billion in defense manufacturing to address the US's slow weapons production compared to China. Companies like Neros, Anduril, and Saronic Technologies are building factories capable of producing tens of thousands of AI-powered autonomous ships, drones, and fighter jets. VCs and startups are prioritizing rapid manufacturing to gain a strategic advantage in modern warfare.

Silicon Valley startups are investing $4 billion in defense manufacturing to address the U.S.'s slow weapons production compared to China. Companies like Neros, Anduril, and Saronic Technologies are building factories capable of producing tens of thousands of AI-powered autonomous ships, drones, and fighter jets. Venture capitalists (VCs) and startups are prioritizing rapid manufacturing to gain a strategic advantage in modern warfare.

Neros Inc., for instance, plans to increase its monthly drone production from hundreds to 10,000 by the end of 2025. The company aims to be ready to fulfill orders for 36,000 drones for Ukraine, despite only having orders for a fraction of that number. Chief Executive Officer Soren Monroe-Anderson believes that waiting for buyers to come knocking would be too late and that the supply chain is the hard part. The company is putting in the work now to be able to produce weapons later [1].

Anduril Industries Inc. and Saronic Technologies are undertaking the largest projects, investing $1 billion and $2.7 billion respectively to build software-operated manufacturing megafactories. These facilities are designed to produce tens of thousands of AI-powered autonomous ships, aerial drones, fighter jets, and other weapons [1].

The efforts could help address a glaring problem in American national security: the slow speed of U.S. weapons manufacturing compared with China. In most modern-day wartime scenarios, the country that’s able to quickly produce the most autonomous drones, ships, and other hardware has a vast advantage. VCs and startups have been vocal about this problem, with Joe Lonsdale invoking the critical role of World War II-era production efforts, and Andreessen Horowitz adviser Matt Cronin calling the issue an “existential threat” to U.S. national security [1].

However, building out industrial infrastructure is a gamble for venture investors who are spending large sums to expand production with no guarantee that famously hard-to-get defense contracts will materialize. VCs have plowed more than $70 billion into the top 100 defense startups, which have so far secured about $29 billion total in contracts [1].

While startups are making inroads — the Defense Department more than doubled its annual spending on startups in 2024 — the group still represents less than 1% of the overall defense budget [1]. The bulk of defense spending goes to traditional contractors, specifically Lockheed Martin Corp., RTX Corp., Boeing Co., Northrup Grumman Corp., and General Dynamics Corp. Known as the “Big Five,” these firms have been around for decades and have deep Washington relationships [1].

The market is telling these companies to grow — and investors are backing them. However, the Department of Defense has not yet built the contracting infrastructure or funding flexibility to meet the moment. The result could be a “two-speed ecosystem” where private capital continues to grow while public funds remain tied to legacy processes and contractors. Ultimately, this is not sustainable, and we risk ecosystem momentum collapse [1].

References:
[1] https://www.bloomberg.com/news/articles/2025-07-25/silicon-valley-s-4-billion-gamble-on-defense-manufacturing