By Drew FitzGerald, Heather Somerville and Nancy A. Youssef

Silicon Valley-linked defense companies are seizing on their newfound influence in the Trump administration to address the Pentagon's shifting focus, pitching their services in fields ranging from autonomous drones to a newly named "Golden Dome" missile-defense shield.

Newer contractors like Anduril Industries, Palantir Technologies and Epirus are lobbying for new contracts and working to convince Pentagon officials that their technology will better equip the military. Many see the Pentagon's pivot toward new missions as a key chance to win a bigger share of its budget, though their success is far from assured.

"I've been advising companies and venture firms to just jump on this train because we don't know how long it will last, but it is incredibly favorable to defense tech," said Jacqueline Tame, the acting executive director of Silicon Valley Defense Group, which liaises between defense-tech startups and the Pentagon.

In one case, Pentagon officials are reviewing an outside proposal to build a defense system using technology from Anduril, Palantir and Elon Musk's SpaceX, according to people familiar with the matter. The plan is a response to President Trump's January executive order to develop a next-generation missile defense shield that the administration called the Iron Dome for America, an effort since renamed the "Golden Dome."

The defense-tech sector's missile-defense pitch is one of a few options the Defense Department could pursue to meet the president's requirements, which include a satellite network and space-based interceptors. The executive order requires the Pentagon to submit an implementation plan for the missile shield by late March.

Other companies see opportunities after Defense Secretary Pete Hegseth ordered the department to look for ways to save 8% each year for five years and give priority to programs such as the Collaborative Combat Aircraft, which includes drones from Anduril. Hegseth also wants to ensure the department still spends money on attack drones, autonomous systems and drone-defense technology -- tech development that is often coming from startups -- according to a memo viewed by The Wall Street Journal.

Hegseth's memo signaled the department's new funding priorities are moving away from some bigger weapons programs and the traditional contractors that serve them.

Redirecting some of those resources toward new programs could boost midsize defense-tech companies Anduril and Palantir, and offer younger startups a toehold inside the Pentagon. Silicon Valley has long hoped for this opportunity. Despite years of promises from the department that it will buy more startup technology, venture-backed companies still receive only about 1% of Defense Department awards, according to data from software firm Govini.

During his confirmation process, Hegseth said the military should look for areas where it "can more aggressively embrace our commercial partners" in space and expand into new mission areas.

Established defense contractors have traditionally soaked up most of the funding for big, complex military programs in space and on the ground. Expensive and complicated weapons that take many years to develop have given the traditional contractors perennial spots atop the Pentagon's budget. Reluctance within the Defense Department to spend money on unproven startups has helped to keep the large military contractors dominant.

"This might be the administration where the old industrial defense structure finally breaks and they get beat out by the startup guys," said Tanveer Kathawalla, a managing partner with Pioneer1890, a buyout firm of venture-backed companies in national-security fields. But, he said, "We have yet to see the primes strike back."

Taking business away from the defense primes, as the established military contractors are known, would likely face opposition from members of Congress whose districts are home to these massive companies, which employ a lot of people. Defense primes are also large campaign contributors and have lobbying firepower and yearslong relationships with key members of congressional leadership, particularly on the armed services committees.

Many specific program decisions are on hold until Congress confirms other senior Pentagon nominees. The White House picked several private-sector executives for top Pentagon jobs, including Cerberus Capital Management co-Chief Executive Stephen Feinberg as deputy defense secretary.

The tech industry and its private-capital backers have greater access to Pentagon officials than in prior administrations. Department officials have met with venture capitalists including Joe Lonsdale, who has funded and helped to start some of the largest industry players, to discuss military spending priorities. Trae Stephens, a partner with Peter Thiel's venture firm Founders Fund who helped launch Anduril, has consulted with the Trump administration on reshaping military priorities, and was considered for a top Pentagon role.

Defense-tech companies have jockeyed to better position themselves for the possibility of lucrative awards by forming technology-sharing partnerships that would allow them to share the proceeds of bigger contracts from the new administration. Anduril and Palantir, for instance, announced a consortium in December to sell their artificial-intelligence technology to the U.S. government.

"We're pretty optimistic," Palantir Chief Technology Officer Shyam Sankar said on a recent earnings call. "These forever software projects that cost an insane amount, that don't actually deliver results, they're sacred cows of the deep state."

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com, Heather Somerville at heather.somerville@wsj.com and Nancy A. Youssef at nancy.youssef@wsj.com

(END) Dow Jones Newswires

February 28, 2025 05:00 ET (10:00 GMT)

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