Investing in a hypersonic weapons company, once a career-ending move in Silicon Valley, is now seen as a crucial act of deterrence. This rapid cultural reversal, catalyzed by geopolitical events, signifies a profound sea change in the tech industry's values and its relationship with national security.
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The dynamic between tech and government is not a simple decline but a cycle of alignment (post-WWII), hostility (2000s-2010s), and a recent return to collaboration. This "back to the future" trend is driven by geopolitical needs and cultural shifts, suggesting the current alignment is a return to a historical norm.
The conflict in Ukraine exposed the vulnerability of expensive, "exquisite" military platforms (like tanks) to inexpensive technologies (like drones). This has shifted defense priorities toward cheap, mass-producible, "attritable" systems. This fundamental change in product and economics creates a massive opportunity for startups to innovate outside the traditional defense prime model.
German defense firm Rheinmetall's market cap surged from $5B to $80B post-Ukraine invasion, mirroring the explosive growth of AI companies. This highlights how major geopolitical shifts can act as powerful, unexpected catalysts for traditional industries, creating immense value for well-positioned incumbents.
Leading AI companies, facing high operational costs and a lack of profitability, are turning to lucrative government and military contracts. This provides a stable revenue stream and de-risks their portfolios with government subsidies, despite previous ethical stances against military use.
Investing in defense, energy, and public safety is not just another vertical. These foundational sectors uphold the stable democracy on which all other tech, like B2B SaaS, depends. A failure in these foundations renders investments in higher-level software and services worthless.
Contrary to the last 20 years of tension, Silicon Valley's history is deeply intertwined with the U.S. national mission. From the 1950s to the 1990s, a tight alliance with defense and government agencies was standard, making the recent hostility a historical aberration that is now correcting itself.
The defense tech sector is experiencing a perfect storm. This 'golden triangle' consists of: 1) Desperate customers in the Pentagon and Congress seeking innovation, 2) A wave of experienced founders graduating from successful firms like SpaceX and Anduril, and 3) Abundant downstream capital ready to fund growth.
Working with the military is no longer the hot-button issue it was 6-8 years ago in the tech community. The public and internal debate has moved on to the societal impacts of AI, such as election manipulation, job displacement, and content moderation, making defense tech a relatively less controversial field to work in today.
The pendulum swing from software back to hardware and defense is mirrored by a change in the dominant engineer archetype. The era of the "Facebook generation" coder is giving way to a resurgence of the "Palmer Luckey" type—engineers who work with physical systems and build with their hands, echoing Silicon Valley's original pioneers.
A significant, under-the-radar shift has occurred in venture capital: the U.S. government is now a key partner and co-investor in early-stage deep tech. Firms like Voyager Ventures report that nearly half their portfolio companies have government deals, with entities like In-Q-Tel becoming frequent co-investors, marking a new era of public-private collaboration.
