Silicon Valley defense startup Shield AI valued at $5 billion

Shield AI, an artificial intelligence start-up in Silicon Valley, recently announced that in a new round of financing, its valuation will almost double to US$5 billion.

The San Diego-based company, which focuses on developing AI-powered software for drones and autonomous aerial vehicles, plans to raise about $200 million in funding from multiple defense and aerospace companies, including big names such as Palantir, Airbus and L3 Harris. . Venture capital firms Andreessen Horowitz, Point72 and Riot Ventures are also expected to participate in this financing.

The financing will increase Shield AI's valuation from last year's level of $28 billion and reflects investors' keen interest in defense technology companies, especially as the U.S. government plans to increase defense spending. In recent years, wars in Ukraine and the Middle East and heightened geopolitical tensions between the United States and China have deepened Washington's reliance on technology companies developing advanced AI products that have potential military applications.

Shield AI's core product, "Hivemind" software, allows drones and aircraft to operate independently without GPS, communications or human pilots. Many competitors, including some traditional defense giants, have begun integrating Shield's autonomous technology into their aircraft. Industry insiders said, "Companies invest among competitors, often based on strong strategic reasons." These investments also demonstrate the companies' "serious commitment" to applying Shield's autonomous technology to their projects.

The financing comes as technology companies fight for a larger share of the US$850 billion U.S. defense budget, putting traditional defense contractors such as Lockheed Martin, Raytheon and Boeing under pressure. Last month, the Financial Times revealed that US defense technology giants such as Palantir and Anduril were in talks with about ten competitors to form a consortium to jointly win defense contracts. Shield AI is part of the consortium.

Additionally, companies such as Palantir, SpaceX, Anduril, and OpenAI have in some cases begun integrating their systems to more quickly advance U.S. military capabilities. During his Senate confirmation hearing, Trump's nominee for defense secretary, Pete Hegseth, emphasized the need to accelerate weapons development through competition and innovation. He praised Silicon Valley's performance, saying it was "the first time in generations that it has shown a willingness, desire and ability to bring its best technology into the Pentagon."

Investors have been quick to show support for Silicon Valley's booming defense industry. Palantir's stock price has risen 330% in the past year, giving it a market value of more than $160 billion. The data intelligence company was co-founded by technology investor Peter Thiel, who also provided initial funding for Anduril, which was founded in 2017 and was valued at $14 billion last year.