The Iran war is defense tech's chance to shine, but few systems and weapons are ready

The ongoing conflict in Iran is reshaping the landscape of modern warfare for the United States, sparking an urgent need for cost-effective military technology. Defense Secretary Pete Hegseth previously cautioned against the high costs of intercepting inexpensive drones with expensive missiles, stating, "We cannot afford to shoot down cheap drones with $2 million missiles." Just two days into the war, U.S. forces expended an estimated $5.6 billion in munitions as Iran unleashed a barrage of low-cost Shahed drones, each priced between $20,000 and $50,000, targeting military installations and vital infrastructure. This conflict may present a pivotal moment for defense technology firms and Silicon Valley, which have long sought a foothold in the lucrative Pentagon budget. As the war unfolds, it coincides with President Donald Trump’s initiatives to revitalize military production, potentially accelerating growth for innovative defense tech companies. Mike Brown, a partner at Shield Capital, noted, "The world is more dangerous now, and technologies that were once theoretical are proving their worth on the battlefield." The U.S. has introduced its own budget-friendly combat drone known as the Low-cost Uncrewed Combat Attack System (LUCAS), developed by Arizona’s SpektreWorks, with an estimated cost of $35,000 per unit. Despite its potential, LUCAS is one of the few new systems emerging from the conflict, as the majority of U.S. air operations in the region continue to rely on traditional fighter jets and bombers. In response to the drone threat, Aerovironment announced the Locust X3 laser system, claiming it will cost less than $5 per shot. Major players like Lockheed Martin, RTX, and Leidos are also offering solutions, while startups such as Anduril and Epirus are scaling up their counter-drone capabilities. However, despite the apparent demand, these technologies received only $4.7 billion in funding from the fiscal 2026 budget, according to data from Obviant, a defense intelligence firm. Brett Velicovich, co-founder of drone company Powerus, emphasized the importance of competition, stating, "Let the companies that have the best technology win; it’s beneficial for our country." Noteworthy defense tech companies such as Anduril and Palantir have secured substantial contracts with the Pentagon, reflecting their growing influence in the sector. The push for enhanced military technology began prior to the Iran conflict, with Trump issuing executive orders aimed at modernizing outdated military systems. His proposed $185 billion "Golden Dome" missile defense initiative is also expected to create opportunities for startups in shipbuilding and drone sectors. As demand from the Department of Defense surges following the U.S. and Israel’s military actions against Iran, many defense startups are facing a dilemma: should they increase production capacity in anticipation of contracts or risk losing out on opportunities? Ryan Tseng, president of Shield AI, stated, "We have received clear demand signals from the Pentagon, and people are more prepared than ever before." While firms like Chaos Industries are ramping up production, the complexity of government contracts and procurement processes complicates their ability to scale. John Tenet, CEO of Chaos Industries, remarked on the urgency of meeting customer demand, noting, "If you’re waiting for the contract to scale production, you’re already too late." The Pentagon plans to invest billions into defense technology, with Trump proposing a $1.5 trillion military budget by 2027. However, the sluggish contracting process and bureaucratic hurdles present significant challenges for these companies. Experts warn that despite increased production efforts, many innovative tools are yet to be deployed effectively in combat zones. Hegseth has called for a large-scale production of drones, emphasizing the need to develop hundreds of thousands of them quickly and affordably by 2027, a task that has become increasingly urgent in light of the ongoing conflict.