The Department of Defense and U.S. intelligence communities awarded $53 billion in contracts to major tech firms over a three-year period
A new report from Brown University’s “Costs of War” project sheds light on a renewed closeness between the Pentagon and Silicon Valley, with the Department of Defense and U.S. intelligence communities awarding contracts to major tech firms worth as much as a combined $53 billion between 2019 and 2022.
As the U.S. military and intelligence agencies look to deploy AI-enabled military technologies and use cloud computing services, the report’s author, Roberto J. González — who teaches at San José State University — said the Defense Department and the CIA now “routinely award multiyear contracts to major tech firms.”
Silicon Valley in northern California is home to some of the biggest chip, computer, and software companies, not to mention AI startups, but it would not exist without the Pentagon’s Cold War-era funding in the 1950s and 60s.
“Silicon Valley built elegant miniaturized machines that could power missiles and rockets, but that also held possibilities for peaceful use—in watches, calculators, appliances, and computers, large and small,” wrote Thomas Heinrich in his 2002 book, Cold War Armory: Military Contracting in Silicon Valley.
But the Brown report says today’s Pentagon spending streams are destined for a different breed of defense contractors: “a combination of gargantuan tech firms … and hundreds of smaller startup companies supported by VC firms,” González wrote.
One such gargantuan deal was the National Security Agency’s $10 billion, five-year contract with Amazon $AMZN awarded in 2021, called “Wild and Stormy,” which aimed to move the agency’s intelligence and surveillance data onto Amazon’s cloud.
“These multi-year contracts, in which Big Tech firms are primarily providing “software as a service” rather than hardware or equipment, may have the effect of making the Pentagon and CIA more dependent than ever on the expertise of technical experts from the private sector. It is also likely to lead to a situation where Defense Department officials rely heavily upon the goodwill and cooperation of tech leaders on a continuous basis for some of its most basic functions.” —Roberto J. González
A lot of military funding is going to startups as well. For example, the AI company Palantir $PLTR, which is now public, has had contracts with the CIA, the NSA, the FBI, the Marine Corps, the Air Force, and the Special Operations Command as well as the Israeli Defense Forces. In 2020, the U.S. military awarded $800 million to the company, and more than half of its revenue comes from the U.S. government, the paper said.
Other defense tech contractors, which are still pre-IPO, include Anduril Industries, Shield AI, HawkEye 360, Skydio, Rebellion Defense, and Epiru.
$53 billion: Combined value of contract ceilings between U.S. military and intelligence agencies and major tech firms between 2019 and 2022
$100 billion: How much venture capital funding went to defense tech startups from 2021 to 2023
In December 2022 the Defense Department launched the Office of Strategic Capital, an entity set up to link AI and other startups with sources of private capital.
“OSC aims to use the United States’ comparative advantages in capital markets and economic competition to crowd in capital for the critical technology supply chains needed by the Department of Defense,” says its website.
Correction: A previous version of this article called the NSA the “National Security Administration” rather than the National Security Agency.
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