- Defense tech startups are anticipating growth under Trump's second term.
- Palmer Luckey's Anduril and others have recently secured large defense contracts.
- Elon Musk's ties with Trump and Vance could drive defense acquisition reforms.
Some leaders in the defense tech industry, including Anduril cofounder Palmer Luckey, think that defense tech startups are poised for success during president-elect Donald Trump's second term.
Over the last decade, Silicon Valley has made waves in the defense tech industry. Startups like Anduril, which makes autonomous vehicles for military use, have secured multimillion-dollar contracts from the US government. Luckey founded Anduril in 2017 after previously founding virtual reality company Oculus, which he sold to Meta for $2 billion.
Last month, Anduril unveiled its new AI-powered Bolt-M drone, which fits in a backpack. Anduril developed the drones as part of $249 million in contracts awarded to the companies Anduril, AeroVironment, and Teledyne FLIR to provide "kamikaze drones" for the Defense Department, according to DefenseScoop, a military news blog.
In an interview with Bloomberg TV, Luckey said it is "good to have someone inbound who is deeply aligned with the idea that we need to be spending less on defense while still getting more: that we need to do a better job of procuring the defense tools that protect our country."
"Anduril's been around for about eight years now," Luckey said. "We did well under Trump in his first administration, and we did even better under Biden in his administration, and I think we're going to do even better now."
Some of the defense tech industry's optimism for Trump's victory lies in SpaceX founder Elon Musk's proximity to the president-elect and his vice president, JD Vance, Forbes reported.
"The close relationships between Vance, Elon, and the defense VC and startup ecosystem will create a huge opening for real defense acquisition reform and widening of the number of players," Nathan Mintz, CEO of CX2, an electronic warfare company, told the outlet.
Luckey told Bloomberg that Musk has "outperformed every reasonable expectation." Luckey said he was initially skeptical of Musk's ability to take on projects at his other ventures like SpaceX and X while "also keeping this administration focused on things like space."
"But anyone who has ever bet against Elon has come away crying," Luckey said.
Defense tech leaders also say the potential elimination of so-called "cost plus" contracts, which give contractors financial incentives for meeting certain performance measures, could be good for the industry, Forbes reported.
Luckey told Bloomberg that cost-plus contracting "reward exactly the wrong things" and that defense product companies should be incentivized to use their own money to "decide what to build, how to build it, and when it's done."
"Then they have skin in the game," Luckey said. "When they fail, they lose money. When they succeed, they make money."
Luckey, a longtime supporter of Donald Trump, said he was "certain" that Trump would win the election and that his victory did not influence Anduril's planning because it was "already baked in."
Luckey added that the defense industry is "one of the few that has actually successfully remained pretty nonpartisan," noting that he is a Republican and Anduril CEO Brian Schimf is a Democrat.
"The idea that the United States military should have the strongest military in the world and that we should defend our allies around the world … it's a pretty non-partisan idea," Luckey told Bloomberg.