Are AI defense firms about to eat the Pentagon?

In an unprecedented wave of collaboration, leading AI firms are teaming up—sometimes with rivals—to serve a Pentagon and Congress determined to put AI to military use. Their growing alignment may herald an era in which software firms seize the influence now held by old-line defense contractors.

“There's an old saying that software eats the world,” Byron Callan, managing director at Capital Alpha Partners, told Investors Business Daily on Wednesday. “It's going to eat the military too."

Over the last week, Palantir, Anduril, Shield AI, OpenAI, Booz Allen, and Oracle announced various partnerships to develop products tailored to defense needs. Meanwhile, the House passed the 2025 National Defense Authorization Act with provisions that push the Defense Department to work more closely with tech firms on AI, and DOD announced yet another office intended to foster AI adoption.

Perhaps the most significant partnership is between Palantir and Anduril, two companies that offer somewhat competing capabilities related to battlefield data integration. Palantir holds the contract for the Maven program, the seminal Defense Department AI effort to derive intelligence from vast amounts of data provided by satellites, drones, and other sensors. Anduril offers a  mesh-networking product called Lattice for rapid collection and analysis of battlefield data for drone swarming and other operations. 

Just a day earlier, Palantir and Shield AI expanded their own partnership to include the deployment of Palantir’s Warp Speed for integrating data into workflow. Their collaboration has sought to integrate Shield AI's autonomous systems with Palantir’s data-processing platforms to provide commanders with a clearer operational picture. Shield AI also competes against Anduril with its autonomous piloting and drone swarm software for GPS-denied environments. 

Anduril also has new team-ups with Oracle, whose cloud infrastructure will support Anduril’s autonomous systems to offer real-time data analysis near the battlefield; and with fellow drone maker Archer, to develop hybrid-propulsion aircraft for defense.

Finally, Palantir announced a partnership with longtime defense contractor Booz Allen Hamilton to make AI tools for logistics, autonomous systems, and other applications.

Congress gets behind AI firms

On Wednesday, the House approved a 2025 defense authorization bill that includes several provisions intended to spur military adoption of AI. The bill puts a big emphasis on building out data and cloud computing resources to enable much faster adoption of AI and AI-enabled weapons, areas where companies like Anduril, Palantir, Booz Allen, and Shield AI excel. 

One of the most ambitious is Section 1532, which mandates the expansion of secure, high-performance computing infrastructure to support AI training and development. 

This infrastructure, which will include partnerships with commercial and hybrid cloud providers, is critical for developing scalable AI models capable of adapting to evolving mission requirements.

Section 236 also presses the Pentagon to deepen partnerships with the private sector and academia, building on commercial expertise to accelerate innovation.

The act also includes stringent reporting requirements intended to ensure accountability and adaptability. From pilot programs in biotechnology to operational testing of cheap, autonomous drones under the Replicator program, the Pentagon must provide regular updates to Congress, demonstrating progress and addressing challenges.

“Annual updates will assess data resources, cybersecurity measures, and the potential for operational use of technologies,” the legislation says.

The Pentagon needs to reshape its acquisition philosophies to accommodate software firms, DIU Director Doug Beck said on Saturday. Instead of buying things via program requirements, the Defense Department must give companies more flexibility to design products that might be useful for defense and then bring those to the Pentagon. 

That could be a boon to companies like Anduril, which has found a way to produce and even battlefield-test products before the Defense Department even asks for them. 

“If you give exact definitions and just port more money against it, then…you actually don't incent the kind of behaviors that you want,” Beck said Saturday at the Reagan National Security Forum. “Instead, for those major areas of tech change, we should provide a consistent demand signal of the critical areas we'll be buying in, rather than specific programs, areas like AI, autonomy, space, biotech.” 

Beck said the hope is that this approach will induce competition among industry players. 

It’s not yet clear how the emerging partnerships will square with that.

One Defense Department official, speaking on background, called Anduril and Palantir the “success stories of the defense-tech movement.” The official said he wouldn’t be surprised if the partnerships signaled “a play to shape the next administration’s approach” to buying defense technology.

That will be even easier under Palantir CTO Shyam Sankar, who has reportedly been  picked to lead the Pentagon’s research and engineering efforts under the next administration. 

Anduril and Palantir did not respond to requests for comment on this story.

New DOD AI cell

Which agency or office in the Department of Defense will spearhead accountability and governance over players that are increasingly coordinating their approach? That falls to the Chief Digital and Artificial Intelligence Office, better known for its efforts to foster the use of AI.

Just on Wednesday, the CDAO and the Defense Innovation Unit announced that they had created an AI rapid capabilities cell to accelerate the exploration, testing, and adoption of generative AI. 

The NDAA also pushes the CDAO to smooth the adoption of AI. Section 1521 tasks the office with increasing and synchronizing the use of modern data formats and sharing standards across the department. This includes defining and implementing a strategy to transition from obsolete data formats to modern ones in weapons, command-and-control systems, and sensors. 

Those company partnerships announced last week are directly relevant to that—and to Section 233, which requires “the development of a strategy to invest in advanced technologies, including automated systems and artificial intelligence, to streamline the process of organizing, indexing, and categorizing data.” 

CDOA chief Radha Plumb is scheduled to depart in January as the new administration takes over. Her successor will be tasked with implementing those NDAA provisions on data synchronization and strategy development. But they will be overseeing an AI defense contractor community that is increasingly synchronized in their approach to data standards, reporting, and competition. 

Scott Nover, writing at GZERO Media, called this an incipient “AI military-industrial complex.”

In November, Palantir passed Lockheed Martin in one closely watched measure: market cap. In a letter to investors that month announcing quarterly revenue, Palantir founder Alex Karp boasted, “A juggernaut is emerging. This is the software century, and we intend to take the entire market.”

Increasingly, Karp and his fellow defense-tech execs are hunting together.