Over the last few years, geopolitical uncertainties have continued to rise, reaching unprecedented levels of volatility and complexity. This has caused a significant impact on global markets, diplomatic relations, and strategic policymaking.
A major impact of this uncertainty can also be seen in countries around the world, which are increasing their military spending for the 10th consecutive year to prepare for any eventualities.
According to the International Institute for Strategic Studies (IISS), global defense spending in 2024 reached $2.46 trillion, up from $2.24 trillion in the previous year. 2023’s defense spending was stated as the “steepest year-on-year rise since 2009” and the most ever recorded by the Stockholm International Peace Research Institute (SIPRI).
Now, as a result of last year’s jump, global defense spending spiked to an average of 1.9% of GDP last year, up from 1.8% in 2023 and 1.6% in the year before that.
The budgets of countries in the Middle East and North Africa (MENA), Asia, and Europe recorded a significant increase in response to escalating geopolitical conflicts, rising threat perceptions, and deteriorating security environments.
Still, the United States remains the world’s largest military spender, at around $968 billion, and no one comes close. When it comes to the defense budget for NATO members, the US is followed by Germany at $86 billion, the UK at $81.1 billion, and France at $64 billion.
Meanwhile, Asian defense budgets continued to grow at a moderate pace, the same as in the last decade. Japan and Indonesia, in particular, had significant uplifts, but despite that, the region’s share of global spending fell from 25.9% in 2021 to 21.7% in 2024 due to stronger uplifts in other regions.
However, China’s defense budget surged by 7.4% in real terms, outpacing the 3.9% average rate for the rest of the region as the nation modernizes its military. One way this modernization is happening is with the help of artificial intelligence (AI), which is being used to reshape military decision-making.
Chinese leader Xi Jinping has made military AI a top strategic priority, and as a result, the People’s Liberation Army has invested heavily in scaling up AI.
The Rising Trend of AI in Military
By simulating human intelligence processes in computer systems, AI makes machines capable of performing tasks such as learning, problem-solving, and decision-making. Over the past few years, AI usage has exploded across sectors, including the military, where it is being integrated to enhance capabilities in intelligence, surveillance, logistics, and autonomous systems.
Some of the key applications of AI in the military include powering unmanned vehicles and robots for surveillance, logistics, and even combat operations, developing autonomous weapons to identify and engage targets to reduce the risk to human soldiers, and protecting military networks by helping detect and prevent cyberattacks.
AI is also being used to process satellite imagery, analyze vast amounts of data, and interpret real-time data to improve operational efficiency and provide insights for strategic decisions. Moreover, the technology can create realistic simulations for military personnel and help them prepare and improve.
Given the many benefits of AI, its use in the military has been growing exponentially. Countries around the world are spending millions to introduce the latest AI tech into their military operations.
For instance, the potential value of all AI-related federal contracts in the US increased by almost 1200% from 2022 to 2023, as per a Brookings report.
The US military’s AI push, in particular, began many years ago. At the time, it involved tools like computer vision to analyze imagery and identify airstrike targets, but now, it has become much more sophisticated and deeply integrated as technology advances at a rapid pace.
As retired Army Gen. Mark Milley noted at an event last year, smart systems are expected to make up about one-third of the US military within the next decade or so. “It’ll be a fundamental change, and I would argue that other nations’ militaries are going to be similarly designed,” which means the number of human troops can be expected to be reduced.
What this means is that “the country that optimizes those technologies for military use is going to have a very significant — and potentially decisive — advantage in an armed conflict,” said Milley.
Publicly-traded companies like Palantir Technologies (PLTR -3.18%), Lockheed Martin (LMT -1.24%), Raytheon Technologies (RTX -2.15%), and Northrop Grumman (NOC -1.68%) are some of the most prominent names in the military AI sector who are actively supplying their products and tools to governments around the world.
Even the likes of Alphabet Inc. (GOOGL -2.31%), Microsoft (MSFT -2.35%), Amazon (AMZN -3.06%), and OpenAI are providing AI services to the military.
However, today, we’ll be taking a look at some of the best pre-initial public offering (IPO) military companies. Not listed on stock exchanges, these are companies that have raised private funding to support their operations and may potentially have an IPO in the future. So, before they get potentially listed, let’s check them out:
Founded in 2015 by former Navy SEAL Officer Brandon Tseng, Shield AI is an aerospace and defense technology company that develops AI tools for military applications with “the mission of protecting service members and civilians with intelligent, autonomous systems.”
Its core technology includes “Hivemind,” an AI pilot that enables autonomous flight in environments without GPS or human communication. Hivemind covers EdgeOS, Hivemind Commander, Hivemind Pilot, and Hivemind Forge. Using the Hivemind Enterprise tools, Shield AI has autonomously flown MQ-20s, MQM-178s, and F-16s.
Besides Hivemind Enterprise, Shield AI’s products include autonomous drone V-BAT and wide-area motion imaging software, Sentient Vision Systems. As for its revenue, it has been estimated to be $267 million in 2024.
Over the past decade, venture-backed Shield AI has expanded its global presence, with offices in the US, UAE, Ukraine, and Australia, to support US and allied operations worldwide.
Just last month, Shield AI raised $240 million in an F-1 strategic funding round that pushed its valuation to a massive $5.3 billion. This capital will be used to expand Hivemind adoption among companies, governments, and OEMs, enabling the larger robotics and drone industrial base to build and monetize autonomy.
This funding comes on the back of a year in which Shield AI achieved several milestones, including a partnership with India’s JSW Group, deepened collaboration with Palantir, the acquisition of Sentient Vision Systems to enhance ISR capabilities with ViDAR technology, and securing a contract with the US Coast Guard.
2024 also saw Hivemind’s integration onto platforms like the Kratos MQM-178 Firejet and executing advanced dogfight maneuvers with DARPA and the US Air Force.
Last year, V-BAT deployments also surpassed 23. Furthermore, Shield AI won a contract from the Naval Air Systems Command (NAVAIR) for Hivemind deployment and will provide V-BATs to the Japan Maritime Self-Defense Force (JMSDF) for ISR capabilities on its surface vessels.
This combination of autonomous combat flight focus, backing from big-name investors, and partnerships with governments makes Shield AI a critical player in the military AI space.
Click here for a list of top drones & drone warfare stocks.
This AI-powered defense technology company was founded in 2017 by Palmer Luckey, who is known for selling his virtual reality startup, Oculus, to Facebook for $2 billion in 2014. Now, he is working on disrupting traditional defense contractors and believes the US “need(s) to be the strongest military in the world.”
Recently, when discussing AI-controlled weapons, Luckey said the US military had opened a “Pandora’s box” of AI and autonomous weapons a long time ago with the introduction of anti-radiation missiles. “We’ve been in this world of systems that act out our will autonomously for decades,” said Luckey, adding that the best way to compete with China is to win the AI arms race.
Armed with this mission, his company secured $1.5 billion of funding for its Series F round last year to open a manufacturing facility for hyperscale defense manufacturing. Around that time, Anduril also announced a partnership with OpenAI, allowing it to deploy advanced AI systems for national security missions.
Less than a year later, it has been speculated that Anduril is looking to raise to $2.5 billion at a $28 billion valuation. When it comes to the company’s revenue, it is estimated to have surpassed $1 billion in 2024.
Now, Anduril’s core technology includes autonomous systems, such as drones and surveillance platforms. Its key products, meanwhile, include the Ghost 4 drone, the Roadrunner interceptor, and the Lattice AI platform. Also, it has a manufacturing platform for modern warfare that focuses on central infrastructure, software-defined production, design for simplicity and scalability, and a resilient supply chain.
Anduril has secured several contracts with the US Army, and this year, it took over the massive $22 billion, 10-year contract from Microsoft, which the tech giant won in 2021 to build over 120,000 custom HoloLens headsets for the Army. While Microsoft will continue to provide cloud and AI capabilities for Integrated Visual Augmentation Systems (IVAS), Anduril will oversee “production, future development of hardware and software, and delivery timelines.”
Luckey has called IVAS “a once-in-a-generation opportunity to redefine how technology supports those who serve.”
This month, Anduril also successfully test-fired its hypersonic solid rocket motor for the US Navy, which will soon go into full-scale production.
So, a visionary founder with a strong track record, combined with an arsenal of mini fighter jets, notable partnerships, global presence, and contracts with the US government, makes Anduril a new-generation defense prime.
Less than a decade ago, two former Google executives, software engineer Peter Ludwig and Qasar Younis, a former chief operating officer at Y Combinator, founded Applied Intuition. The company focuses on developing, training, and testing AI-based software for autonomous systems, particularly military ground vehicles.
Besides being trusted by the US Army and other branches for testing battlefield autonomy, Applied Intuition’s products are also used by several leading global automakers, including Toyota, General Motors, and Volkswagen. CEO Younis actually wants his company to be the “first call” when automakers or defense companies have an AI or software problem to solve.
The company’s products involve simulations that let automakers test their autonomous software and assess their perception stack and vehicle behavior systems. For the defense sector, meanwhile, it provides AI-powered autonomy capabilities to the warfighter across land, water, air, and space. Applied Intuition’s estimated annual revenue is approximately $100 million.
Last summer, Applied Intuition completed a $300 million secondary sale, which came just a few months after raising a $250 million Series E round. This round attracted big names like Fidelity, Microsoft, Andreessen Horowitz, and Porsche as its backers.
The funding is to help the company expand, which has already established a foothold in the US, Germany, Korea, and Japan, serving customers across the automotive, mining, construction, and trucking industries.
Its defense segment has also grown rapidly through its agreements with the US Air Force and Army. Late last year, Applied Intuition acquired EpiSci to accelerate the growth of its defense business, enabling it to further expand its offerings into maritime and aerial applications due to a 90% overlap in advanced simulation and tooling technologies.
EpiSci boasts products like TacticalAI software, an autonomous “co-pilot” to help drones and fighter jets make real-time decisions, and has secured contracts with DARPA, AFWERX, and the US Navy. With this move, Applied Intuition will enable the development of all-domain autonomy that can be deployed in both contested and peacetime environments. This, combined with its own testing software and prominent clients, makes it a formidable player in the national security tech landscape.
AI is only as good as the data it is trained on, so Scale AI has focused on providing the best data quality by combining AI-based techniques with human-in-the-loop data labeling. It actually used a large number of contract workers to tag images, text, and other kinds of data before it was used for AI training.
Founded in 2016, Scale AI’s clientele includes OpenAI, Anthropic, Cohere, Microsoft, and Morgan Stanley, among others, which utilize its services to create and refine datasets. More importantly, the company has been strengthening its ties with the government and rolled out the Defense Llama last year for military use.
In an interview, CEO Alexandr Wang described the AI race between the US and China as an “AI war” and that the former is going to need a huge amount of computational capacity. He has shared his concerns about AI helping China “leapfrog” the military capabilities of Western powers and, most recently, suggested integrating AI agents into the government. According to CEO Wang:
“It was very much drilled into my childhood that American leadership in science and technology is the core of why we as a country are able to maintain our leadership. It’s so critical to ultimately how America stays ahead in the global order.”
In March, Scale AI announced that the Defense Innovation Unit (DIU) had awarded it a multi-million-dollar contract for Thunderforge, which will integrate AI into military planning and operations.
In an attempt to capitalize on the booming demand for the technology, the AI startup is currently seeking a valuation of $25 billion in a potential tender offer. This is close to double the valuation the company had last year when it raised $1 billion in a late-stage funding round in which Nvidia, Amazon, and Meta participated. As for revenue, it generated about $870 million in 2024, which is expected to reach $2 billion this year.
So, Scale AI’s focus on data and providing AI-driven tactical decision support not only makes it stand out among companies integrating AI in the military but also strengthens its role as a critical enabler of next-generation warfare capabilities.
This California-based aviation software technology company specializes in developing advanced AI systems to augment commercial and defense pilots and make flight operations safer and more efficient.
Beacon AI’s mission is to integrate AI assistance, or Copilot, into professional flight decks for not only commercial but also defense operators.
In October last year, the aviation intelligence startup raised $20 million with investors including Costanoa Ventures, Sam Altman, and JetBlue Ventures. The funding is helping the company deliver on existing DOD and commercial engagements. Beacon AI is actually gaining a lot of traction, having acquired ten DOD contracts.
The funding will also accelerate the deployment of its flagship products, which include an AI-powered pilot assistant called Murdock and Lighthouse, its data platform, and its flight management system.
Bonus: Scout AI & Overland AI
Scout AI is developing autonomous ground and aerial vehicles for the US military. It has raised $15 million in seed funding for its defense-first AI model, called Fury, a Vision-Language-Action (VLA) model. This model is already powering prototypes, including G01 (a ground vehicle) and A01 (an aerial drone), designed to function in low-connectivity environments.
And much like Scout AI, Overland AI has already secured support from the US Army, for which it is developing ground vehicles that can launch drones, carry supplies, and amplify communications. The fully autonomous tactical ground vehicle: the Ultra, which is integrated with the company’s OverDrive software stack, boasts a 1,000-pound payload capacity and a top speed of 35 miles per hour.
So, these are the companies that are heavily involved in AI’s integration in the military and are being watched as potential future IPO candidates. Notably, these companies represent a significant shift in defense technology where innovations in AI are attracting substantial investment from both the government and private sectors to reshape modern warfare!
Click here for a list of top aerospace & defence stocks.