Novel report from Brown University’s “Costs of War” project sheds lightweight on the renewed closeness between the Pentagon and Silicon Valley, with the Department of Defense and the U.S. intelligence communities awarding contracts to major technology companies totaling as much as $53 billion between 2019 and 2022.
As U.S. military and intelligence agencies look to deploy artificial intelligence-enabled military technologies and employ cloud computing services, the report’s author: Roberto J. González, who teaches at San José State University, said the Department of Defense and the CIA “routinely award multi-year contracts to major technology companies.”
Silicon Valley in northern California is home to some of the largest chip, computer and software makers, not to mention AI startups, but it wouldn’t exist without Icy War funding from the Pentagon in the 1950s and 1960s.
“Silicon Valley built elegant, miniaturized machines that could power bullets and rockets, but also had the potential for peaceful employ – in watches, calculators, household appliances and computers, huge and diminutive,” wrote Thomas Heinrich in his 2002 book: The Armory of the Icy War: Military Contracting in Silicon Valley.
But Brown’s report says today’s Pentagon spending streams are intended for a different kind of defense contractor: “a combination of giant technology companies… and hundreds of smaller startups backed by VC firms,” González wrote.
One such giant deal was the National Security Agency’s $10 billion, five-year contract with Amazon concluded in 2021, titled “Wild and stormy” that aimed to move the agency’s intelligence and surveillance data to Amazon’s cloud.
“These multi-year agreements, in which Substantial Tech companies provide primarily software-as-a-service rather than hardware or equipment, may result in the Pentagon and CIA becoming more dependent than ever on the expertise of technical experts in the private sector. It will also likely lead to a situation in which Defense Department officials rely heavily on the goodwill and cooperation of technology leaders on an ongoing basis for some of its most basic functions. —Roberto J. González
A huge part of military funds also goes to start-ups. For example, artificial intelligence company Palantir, which is now public, has contracts with the CIA, NSA, FBI, Marine Corps, Air Force and Special Operations Command as well as the Israeli Defense Forces. According to the newspaper, in 2020 the US military awarded the company $800 million, and more than half of its revenue comes from the US government.
Other pre-IPO defense technology contractors include Anduril Industries, Shield AI, HawkEye 360, Skydio, Rebellion Defense and Epiru.
By the numbers
$53 billion: Total value of contract caps between US military and intelligence agencies and major technology companies, 2019-2022
$28 billion: How much the Pentagon and the US intelligence community awarded to Microsoft, Amazon and Google between 2018 and 2022, which González says is likely a conservative estimate
$100 billion: How much venture capital funds went to startups in the defense technology industry in 2021–2023
Agency Concerned: U.S. Office of Strategic Capital
In December 2022, the Department of Defense launched Office of Strategic Capitalan entity created to connect AI and other startups with sources of private capital.
“OSC aims to leverage the United States’ comparative advantage in capital markets and economic competition to attract capital to key technology supply chains needed by the Department of Defense,” its website says.
