>>> US Early premarket gappers

Early premarket gappers
  • Gapping up:
    • PLBY +16.9%, NUAI +9%, GLSI +7%, GDOT +6.9%, ESLT +6.6%, ATAT +4.1%, DSGR +4%, NOVT +4%, BALY +3.6%, ATAI +2.7%, BNC +2.4%, KLTR +2.2%, FG +2%, FIP +2%, AGRO +1.4%, ETN +1.3%, LYFT +1.3%, HYMC +1.2%, CAAP +1.2%, GNE +1.2%
  • Gapping down:
    • MVST -23.4%, LNSR -22.1%, CMTL -9.9%, TBRG -7.9%, CWCO -7.8%, AP -7.8%, RYTM -5.9%, NGS -5.2%, HUYA -4.6%, SMTC -3.4%, FLX -1.7%, FLR -1.6%, CRWV -1.5%, ALC -1.5%, TME -1.4%, NVTS -1.3%, PI -1.2%, NTAP -1.2%, ALB -0.9%, KDK -0.8%, SNPS -0.8%

FT : Warner Bros chief David Zaslav in line for $700mn payday

Warner Bros chief David Zaslav in line for $700mn payday
One of Hollywood’s highest earners stands to reap huge rewards from Paramount’s $111bn takeover of Warner Bros Discovery

David Zaslav, the boss of Warner Bros Discovery and one of the best paid executives in Hollywood, is in line to make more than $700mn from the $111bn sale of the Hollywood studio to Paramount.

Zaslav could receive $34.2mn in cash severance payments, $115.8mn in vested stock and $517.2mn in unvested share awards, according to a filing by WBD overnight on Monday.

In addition, the WBD chief executive is in line for estimated tax reimbursements of up to $335.4mn.

Tax-code rules mean the payout will decrease with the passage of time as more shares vest and will go to zero if the completion of the deal, which is subject to regulatory and shareholder approval, gets pushed into 2027. Paramount has said it expects the deal to complete in the third quarter.

Zaslav made a further $113mn after selling WBD shares this month.

WBD’s chief has won plaudits from shareholders for overseeing an auction that ended with a knock out bid of $31 a share from Paramount, compared with the $10 a share WBD was trading at this time last year. 

The studio has also enjoyed a stellar year. Paul Thomas Anderson’s One Battle After Another, Sinners and Weapons picked up Oscars this weekend, while A Minecraft Movie reaped high returns at the box office.

Even so, Zaslav’s huge windfall will cause unease in Hollywood at a time when Paramount is expected by analysts to cut thousands of jobs from the combined studios, TV and news operations.

Zaslav’s pay has been a contentious issue since he was awarded a stock options-heavy package worth $247mn in 2021. A majority of WBD shareholders voted against his $52mn pay deal in 2024.

Monday’s filing also revealed payments to other WBD executives and advisers.

JB Perrette, boss of its global streaming and games business, could receive $142mn in cash severance and equity and chief financial officer Gunnar Wiedenfels is in line for $120mn.

In the filing, WBD said that these payouts were “estimates based on multiple assumptions” and that the actual amounts “may materially differ”.

WBD also revealed its payments to financial advisers, with Allen & Co expected to get as much as $100mn and JPMorgan about $90mn.

FT : Trio of European states set up new fund to boost defence spending

Trio of European states set up new fund to boost defence spending
UK, Netherlands and Finland join forces to reduce procurement costs through economies of scale

The United Kingdom, the Netherlands and Finland have joined forces to fund joint defence procurement through a new multilateral mechanism, in an effort to boost value for money as Europe undergoes a massive rearmament drive.

The mechanism would “strengthen collective deterrence, expand defence industrial capacity and increase defence capability through joint procurement”, the countries wrote in a statement.

It would operate like an international financing institution, with a mix of guarantees and paid-in capital from participating countries that could attract private investment by issuing bonds.

The goal was to broaden membership from the three countries to other Nato members and “like-minded partners”, one official with knowledge of the discussion said.

Admitting new members would be subject to a unanimous decision by the core group of countries, the official added.

“We are still at the exploratory phase,” said another official, adding that the next steps would include work on a treaty to underpin the new structure.

The goal is to reduce defence procurement costs and unlock economies of scale from pooling orders of tanks, munitions and missiles instead of competing for defence companies’ limited supply, which pushes up prices.

UK chancellor Rachel Reeves said: “Now, more than ever, we must deepen co-operation with our allies. It’s in our long-term interests to strengthen our defence industries, make it easier for our armed forces to work together, and make sure taxpayers get value for money.”

Finland’s defence ministry said work to set up the mechanism was “prompted by major shifts in the security environment”, particularly Russia’s invasion of Ukraine.

Yet the idea has failed to convince Germany of its financial merits; a final decision on membership by Berlin had not yet been taken, said one official.

Berlin is undergoing a defence spending splurge worth €650bn between 2025 and 2030, intended to turn Germany into the strongest conventional army in Europe. Its financial firepower and defence industry would be crucial to any joint rearmament effort.

Guntram Wolff, senior fellow at the Bruegel think-tank and author of a paper last year that described a similar multilateral mechanism, said that by aggregating demand, costs per unit could be halved.

“Deeper defence co-operation across European countries is necessary to reduce costs for taxpayers and ensure technology is developed and controlled in Europe. This new initiative is a right step and I hope more countries will eventually join,” Wolff told the FT.

This is not the first time that European states have entertained the idea of a multilateral funding instrument, with ideas for a rearmament bank being considered but later discarded by countries including the UK.

Reeves has been seeking ways of increasing defence spending as the UK grapples with a delayed 10-year defence investment plan and pressure from the US to boost its contribution.

Britain and its Nato allies have promised to increase defence spending to 3.5 per cent of GDP by 2035, but the UK’s tight fiscal position means it has yet to lay out how it will achieve that goal.

This has prompted the UK to look at a range of innovative solutions, including the defence mechanism concept.

Bruegel’s paper suggested that weapons paid for by a “European defence mechanism” could be temporarily stockpiled, keeping the associated debt off participating countries’ balance sheets.

>>> Europe : Brokers Upgrades & Downgrades - 17th of March 2026 V2(+)

>>> Up
* Aquafil Raised to Buy at Kepler Cheuvreux (+)
* Helios Towers PT Raised to 270 pence at Deutsche Bank (+)
* JCDecaux PT Raised to 28 euros from 22 euros at Berenberg
* LVMH Raised to Outperform at Avior Capital Markets
* Neste Raised to Overweight at Barclays; PT 32 euros
* Puig Raised to Neutral at JPMorgan; PT 16 euros
* Revo Insurance PT Raised to 25.50 euros at Banca Akros (+)
* Richemont Raised to Outperform at Avior Capital Markets

>>> Down
* Aker BP Cut to Hold at Arctic Securities; PT 330 kroner
* Amplifon PT Cut to 9.90 euros at Kepler Cheuvreux (+)
* Amplifon Cut to Hold at Equita; PT 11 euros (+)
* BlueNord Cut to Hold at Arctic Securities; PT 580 kroner
* BW Energy Cut to Hold at Arctic Securities; PT 58 kroner
* Cie des Alpes Cut to Hold at TP ICAP Midcap; PT 29 euros (+)
* Dassault Systemes Cut to Equal-Weight at Morgan Stanley (+)
* Eli Lilly Cut to Reduce at HSBC; PT $850
* Equinor Cut to Hold at Arctic Securities; PT 330 kroner
* GN Store Nord Cut to Hold at Jyske Bank; PT 120 kroner
* Gulf Keystone Cut to Hold at Arctic Securities; PT 210 pence
* IPC Cut to Hold at Arctic Securities; PT 250 kronor
* OVH Groupe Cut to Underweight at Morgan Stanley; PT 8.50 euros (+)
* OKEA Cut to Hold at Arctic Securities; PT 38 kroner
* Revo Insurance Cut to Hold at Equita; PT 22.50 euros (+)
* Roche ADRs Cut to Neutral at BNP Paribas; PT $50
* Roche Cut to Neutral at BNP Paribas; PT 305 Swiss francs
* Senior Cut to Hold at Peel Hunt; PT 285 pence
* UMG Cut to Neutral at BNP Paribas; PT 20 euros
* Unite Group Cut to Equal-Weight at Barclays; PT 520 pence
* Var Energi Cut to Hold at Arctic Securities; PT 40 kroner
* Vetropack Cut to Hold at Research Partners; PT 24 Swiss francs

>>> Initiation
* Abingdon Health Rated New Buy at Cavendish; PT 19 pence (+)
* Comet Rated New Overweight at JPMorgan; PT 335 Swiss francs
* Neodecortech Rated New Buy at Alantra Capital Markets (+)

>>> Call
* Neste Raised to Overweight at Barclays on Margins, Geopolitics (+)
* Puig Upgraded to Neutral at JPMorgan on Margins Optimism
* Roche Downgraded to Neutral at BNP Paribas on ‘Debatable’ Upside (+)

>>> La Lettre - Resume in French & English - 17th of March 2026

Résumé — La Lettre du 17 mars 2026

🇫🇷 Français
BFM TV : restructuration des antennes locales
Arnaud de Courcelles, DG de BFM Locales, redessine la carte des neuf antennes locales de BFM TV, avec un regroupement dans le Sud, un rachat de fréquence dans le Nord et un modèle inédit en Alsace. Dans le Nord, BFM envisage le rachat de la fréquence de Wéo, chaîne généraliste locale fermée en janvier 2026, ce qui permettrait de rebaptiser BFM Grand Lille en BFM Hauts-de-France. En Alsace, un contrat de trois ans a été signé avec Christophe Schalk, patron de la radio Top Music, pour créer une synergie entre radio et télévision locale — une sorte de franchise, CMA Média restant propriétaire de BFM Alsace. Sur le fond éditorial, Arnaud de Courcelles mise sur les droits sportifs locaux à bas coût pour éloigner les chaînes du tout-info.

Politique : le dilemme de Sophia Chikirou
L’élection de Sophia Chikirou au Conseil de Paris l’oblige à choisir entre son mandat de députée, celui de conseillère régionale et son siège à la Ville, en vertu de la loi sur le non-cumul des mandats. Sa qualification avec 11,72 % des voix met en danger le groupe LFI à la région Île-de-France, qui compte sept élus — le quorum minimum pour former un groupe. Pour temporiser, LFI pourrait déposer un recours devant le tribunal administratif contre le résultat du scrutin municipal, ce qui lui permettrait de gagner du temps — jusqu’à un an, voire davantage avec un pourvoi devant le Conseil d’État.

59 Rivoli : imbroglio judiciaire
Le promoteur Marc Berdugo conteste en justice le titre de propriété de la Ville de Paris sur le 59 rue de Rivoli, revendiquant la jouissance patrimoniale exclusive du bâtiment, qui accueille une trentaine d’artistes plasticiens. Le litige remonte à un acte notarié jugé non conforme lors du rachat du bien en 2002, avec une mention inappropriée reconnue par le Service de la publicité foncière. Le contentieux, estimé à 100 millions d’euros, sera jugé en appel en mai.

Medef à Bruxelles
Patrick Martin et son vice-président Fabrice Le Saché ont réuni une cinquantaine de membres du conseil exécutif du Medef à Bruxelles le 16 mars pour peser sur trois dossiers : l’accélérateur industriel, la révision des directives sur les marchés publics et le “28e régime”. Le Medef pousse notamment le label Made with Europe pour limiter les contraintes liées aux accords commerciaux avec les 80 pays partenaires de l’UE.

Club Med : Henri Giscard d’Estaing contre Fosun
Après vingt-deux ans à la tête du Club Med, Henri Giscard d’Estaing mène un dernier combat contre Fosun International, contestant son licenciement qu’il estime dépourvu de cause réelle et sérieuse. Son avocate Julia Minkowski soutient que Fosun avait recruté son successeur Stéphane Maquaire avant même l’annonce officielle de son départ de Carrefour, à l’insu de Giscard d’Estaing.

🇬🇧 English
BFM TV: Local Network Restructuring
Arnaud de Courcelles, CEO of BFM Locales, is redrawing the map of BFM TV’s nine regional channels. In northern France, BFM is pursuing the acquisition of the frequency of Wéo, a local generalist channel that shut down in January 2026, which would allow BFM Grand Lille to be rebranded as BFM Hauts-de-France. In Alsace, a three-year franchise agreement has been signed with Christophe Schalk, head of radio station Top Music, to create an unprecedented radio-TV synergy, with CMA Média retaining ownership of BFM Alsace. Editorially, the strategy leans on affordable local sports rights to steer channels away from round-the-clock news.

Politics: Sophia Chikirou’s Dilemma
Sophia Chikirou’s election to the Paris City Council forces her to choose between her roles as MP, regional councillor, and city councillor, under France’s anti-accumulation of mandates law. Her result of 11.72% of the vote puts the LFI group in the Île-de-France region at risk, as the party holds only seven seats — the minimum quorum to maintain a parliamentary group. To buy time, LFI could file an administrative appeal against the Paris municipal election result, potentially delaying any forced resignation by up to a year or more.

59 Rivoli: Legal Dispute
Property developer Marc Berdugo is challenging the City of Paris’s title to 59 rue de Rivoli — a bohemian art space housing some thirty visual artists — claiming exclusive patrimonial ownership. The dispute hinges on an allegedly non-compliant notarial act from the 2002 acquisition, with an irregular mention acknowledged by France’s land registry authority. The case, valued at €100 million, goes to appeal in May.

Medef Lobbies Brussels
On March 16, Medef president Patrick Martin gathered around fifty executive council members in Brussels to lobby on three fronts: the industrial accelerator, revision of public procurement directives, and the “28th regime.” The employers’ federation is pushing the Made with Europe label to reduce constraints on trade agreements with the EU’s 80 partner countries.

Club Med: Giscard d’Estaing vs. Fosun
After twenty-two years leading Club Med, Henri Giscard d’Estaing is taking his fight to court against Fosun International, contesting his dismissal as lacking genuine and serious cause. His lawyer Julia Minkowski argues that Fosun recruited his successor Stéphane Maquaire before officially announcing his departure from Carrefour, without Giscard d’Estaing’s knowledge.​​​​​​​​​​​​​​​​

>>> What to look at today - 17th of March 2026

A brief revival in global equities led by technology shares looked set to falter heading into the European session as increasing tensions in the Middle East pushed up crude oil. Equity-index futures showed European shares may fall 0.1% at the open while Wall Street gauges may drop slightly more. Souring the mood was Brent crude rising 2.6% to about $103 a barrel — rebounding from Monday’s 2.8% drop — as Iran stepped up attacks on energy infrastructure around the Persian Gulf. Asian shares meanwhile headed for a second day of gains after Nvidia Corp.’s optimistic comments boosted technology shares in the region. Elsewhere, the dollar held its biggest one-day loss in more than a month. Treasuries fell across the curve, with the 10-year yield climbing two basis points to 4.23%. Gold rose for the first time in five days. The Middle East conflict continued to reverberate across markets, with traders closely watching ship traffic through the Strait of Hormuz. US President Donald Trump renewed calls for other nations to help secure the crucial waterway and threatened to expand strikes to oil infrastructure. Meanwhile, Iran set a major gas field ablaze, adding further strain to an already fraught global fuel supply. Traders also remain focused on how policymakers from the Federal Reserve to the European Central Bank and the Bank of England will respond this week to inflation concerns as oil prices rise due to the war in Iran. On Tuesday, the Reserve Bank of Australia raised its key interest rate for a second straight meeting. Meanwhile, Trump expressed his frustration with other nations that have so far been publicly noncommittal on his calls to help ensure vessels can transit the strait. Trump also said he had requested China — among those he’s asked for support — to delay a summit with Xi Jinping for about a month, saying it was important for him to remain in Washington to oversee the war. 
Trump also renewed calls for allies to help safeguard the Strait of Hormuz. Shipping through the waterway has ground to a near-halt, but some transit continues, with a spike of Iranian ships.  A Pakistan-flagged Aframax tanker laden with crude cleared the strait on Sunday and is sailing to Karachi, according to tracking data compiled by Bloomberg. The passage of Iran-linked vessels jumped to 12 vessels over the last 24 hours — a wartime high. That included a very large crude carrier, or VLCC, headed for China. In other corners of the market, Bitcoin rose to trade close to $74,500. The yen remained in focus as it edged closer to the 160-per-dollar mark, reflecting investors’ concerns around the nation’s heavy reliance on imported energy. Traders expected the Bank of Japan to keep interest rates on hold in its policy meeting later this week, with a quarter-point hike expected only in July. US After Hours Very large number of NVDA-related announcements from various companies; SMTC -1.8% lower on earnings.

Nikkei +0.20% Hang Seng +0.45% CSI -0.08% Shanghai -0.39% Shenzen -1.14%

Eur$ 1.1475 CNH 6.8911 CNY 6.8898 JPY 159.46 GBP 1.3278 CHF 0.7896 RUB 81.2281 TRY 44.1901 WTI$ 97.32 +4.11% Gold 5,017 +0.53% BTC 73,900 -0.44% ETH 2,299 -1.92%

S&P -0.51% Nasdaq -0.56% EuroStoxx -0.58% FTSE -0.07% Dax -0.52% SMI -0.15%

Macro :
- Millennium Pulls $1 Billion Allocation From Hedge Fund Scopia
- EU’s Kallas: No Appetite to Change Red Sea Maritime Mandate
- Drone Strike Sets UAE Natural Gas Field Ablaze, Abu Dhabi Says
- Canadian Billionaire Smith Buys 26.9% of The Economist Magazine
- PBOC Is Set to Become World’s Largest Central Bank This Month
- *AUTOMAKERS ADOPT NVIDIA DRIVE HYPERION FOR LEVEL 4 VEHICLES

Keep an eye on :
- ADP FP : ADP Feb. Passenger Traffic +0.6%
- ALC SW : Alcon and LENSAR Agree to Terminate Merger Pact
- BABA US : Alibaba Starts Major Revamp to Heighten Focus on AI Profits (1)
- AMZN US : Amazon Asked by Senators if Melania Film Is ‘Pay-to-Play’ Scheme
- AMZN US : Amazon, Nvidia Collaborating on Advanced AI Assistants for Cars
- AVOL SW : Avolta Holder Taobao China Holding Offers 2.9m Shares: Terms
- BYND US : Beyond Meat Prelim 4Q Net Revenue About $61M, Est. $62.9M
- BNP FP : BNP Cardif Is Said to Near Deal for Warburg Stake in IndiaFirst
- BNP FP : BNP Targets €350 Billion Inflows After Axa Asset Management Deal
- IAGT LN : British Airways Sees 9% Growth in Winter Long-Haul Flights
- Cambridge Aerospace IPO : Cambridge Aerospace in Funding Talks at Over $1b Valuation: FT
- CAN LN : Canal+, PPF Said to Weigh Taking Nordic Streamer Viaplay Private
- CBG LN : Close Brothers Strongly Disagrees With Viceroy Short Report
- CBG LN : Close Brothers 1H Net Interest Margin Misses Estimates
- CBK GY : Merz Says Germany Wants to Preserve Commerzbank’s Independence
- DIS US : Disney Names New Leadership Structure for Disney Entertainment
- ENI IM : Libya Says It Discovered 1 Trillion Cubic Feet of Gas Offshore
- FRA GY : Fraport Sees 2026 Ebitda About EU1.5B, Est. EU1.47B
- GOOGL US : Google in Talks With Envicool For Data Cooling Systems: Reuters
- HBR LN : Harbour Energy Holder LET Offers ~44m Shares via JPMorgan: Terms
- HPE US : HPE Unveils AI Factory, Supercomputing Advancements With Nvidia
- INPST NA : InPost Readies AI Shopping Assistant to Take On Marketplaces
- INS GY : Instone Real Estate Sees 2026 Adjusted Revenue EU550M to EU600M
- IGP LN : Intercede Group Sees Earnings Below Market Expectations
- INTC US : Intel Gains, Xeon 6 Being Used as Host CPU for Nvidia System
- KER FP : Kering to Present New Segment Performance Indicators
- KER FP : Kering Names Duplaix CEO of New Kering Jewelry Unit
- KNEBV FH : Kone Is Said in Discussions to Acquire Competitor TK Elevator
- MMK AV : Mayr-Melnhof FY Dividend per Share Beats Estimates
- MED SW : Medartis FY Sales Meet Estimates
- MU US : Micron Begins High-Volume Production of HBM4 for NVIDIA
- NBIS US : Nebius Partners With Nvidia on Cloud for Robotics, Physical AI
- 7201 JP : Nissan to Sell US-Built Murano in Japan from Early 2027
- NDX1 GY : Nordex Gets Wind Power Orders for 137 MW From Fehmarn-Mitte
- NVDA US : Nvidia Expects to Make $1 Trillion From AI Chips Through ’27
- ROG SW : Roche to Buy 2,176 Nvidia Chips to Expand AI Infrastructure
- 005930 KS : Samsung to Stop Selling $2,899 TriFold Phone After Three Months
- SRT GY : Sartorius Targets 8%-11% Annual Sales Growth From 2027 Onwards
- Space X IPO : *X.AI SUED BY MINORS OVER SEXUALLY EXPLICIT DEEPFAKES: BLAW
- SYT GY : Softing Offers 992,588 Shares at EU3.20/Share
- STMPA FP : STMicroelectronics to Partner With Nvidia on Physical AI
- TSLA US : Tesla, LG Energy to Build $4.3 Billion Plant in Michigan
- TKA GY : US Resolves Labor Dispute at Mexico ThyssenKrupp Springs Plant
- VPLAYB SS : Canal+, PPF Said to Weigh Taking Nordic Streamer Viaplay Private
- YIT FH : YIT Appoints Erkka Repo as New Chief Financial Officer

>>> Europe : Brokers Upgrades & Downgrades - 17th of March 2026

>>> Up
* JCDecaux PT Raised to 28 euros from 22 euros at Berenberg
* LVMH Raised to Outperform at Avior Capital Markets
* Neste Raised to Overweight at Barclays; PT 32 euros
* Puig Raised to Neutral at JPMorgan; PT 16 euros
* Richemont Raised to Outperform at Avior Capital Markets

>>> Down
* Aker BP Cut to Hold at Arctic Securities; PT 330 kroner
* BlueNord Cut to Hold at Arctic Securities; PT 580 kroner
* BW Energy Cut to Hold at Arctic Securities; PT 58 kroner
* Eli Lilly Cut to Reduce at HSBC; PT $850
* Equinor Cut to Hold at Arctic Securities; PT 330 kroner
* GN Store Nord Cut to Hold at Jyske Bank; PT 120 kroner
* Gulf Keystone Cut to Hold at Arctic Securities; PT 210 pence
* IPC Cut to Hold at Arctic Securities; PT 250 kronor
* OKEA Cut to Hold at Arctic Securities; PT 38 kroner
* Roche ADRs Cut to Neutral at BNP Paribas; PT $50
* Roche Cut to Neutral at BNP Paribas; PT 305 Swiss francs
* Senior Cut to Hold at Peel Hunt; PT 285 pence
* UMG Cut to Neutral at BNP Paribas; PT 20 euros
* Unite Group Cut to Equal-Weight at Barclays; PT 520 pence
* Var Energi Cut to Hold at Arctic Securities; PT 40 kroner
* Vetropack Cut to Hold at Research Partners; PT 24 Swiss francs

>>> Initiation
* Comet Rated New Overweight at JPMorgan; PT 335 Swiss francs

>>> Call

>>> Stoxx 600 Pre-Market Indications

  • Frontline PLC (HF6 TH) +3.4%
    • Oil Advances as Iran Targets Persian Gulf Energy Infrastructure
  • Tecan (TEN TH) +2.2%
  • Vistry Group (44B TH) +1.9%
  • K+S (SDF TH) -1%
  • Prosus (1TY TH) -1%
  • Qiagen (QIA TH) -1.2%
  • Zalando (ZAL TH) -1.3%
  • Maersk (DP4B TH) -1.3%
  • Aker BP (ARC TH) -1.4%
  • AB InBev (1NBA TH) -1.4%
  • UMG (0VD TH) -1.6%
    • UMG Cut to Neutral at BNP Paribas; PT 20 euros

>>> TradeGate Pre-Market Indications

DAX:
  • Zalando (ZAL TH) -1.3%
MDAX:
  • RTL (RRTL TH) +1%
SDAX:
  • Springer Nature AG & Co KGaA (SPG TH) +6.2%
    • DBN: Springer Nature steigert bereinigten Betriebsgewinn um 9,2%
  • SUSS MicroTec (SMHN TH) -1.1%
  • Heidelberger Druck (HDD TH) -1.2%
  • Verve Group (VRV TH) -1.2%

The Information : War Doesn’t Belong to U.S. Weapons Startups Yet

War Doesn’t Belong to U.S. Weapons Startups Yet
Defense tech companies argue that warfare is changing rapidly—but the current conflict is using mostly traditional weapons.

The Takeaway
  • U.S. military relies on traditional weapons, not startup tech, in current conflict.
  • Defense tech startups raised $56 billion, secured only $4.3 billion in contracts.
  • Traditional defense contractors remain crucial, securing long-term business.

War focuses attention on the present. That was very clear from a week’s worth of conversations in Washington with leaders at defense tech startups, traditional military contractors and people close to the Pentagon.

Until the U.S. and Israel attacked Iran, buzz was building around startups such as Anduril and Saronic that promised to deliver AI-infused autonomous weapons quickly and economically. The U.S., meanwhile, has relied more in the current conflict on cruise missiles and bombs from its regular stable of traditional defense contractors.

“It’s not very different from how we would have fought a war a decade ago, two decades ago, in terms of munitions,” said Roger Zakheim, director of the national security–focused Ronald Reagan Presidential Foundation and Institute.

That’s a reality check for the venture capital firms that have invested billions of dollars under the premise that warfare is changing rapidly and new defense tech can disrupt old-school contractors. But wartime typically requires only the best-tested weapons systems, and many of Anduril’s most notable offerings, like its autonomous fighter jet, are still just prototypes.

Instead, today’s war has illustrated the importance of prime contractors like RTX, which owns Raytheon, maker of Tomahawk cruise missiles, and Lockheed Martin, builder of fighter jets. Their equipment is in high demand, and restocking supplies will give them business for years.

Moved to the background are startups raising a growing pile of VC dollars to try to win new military programs, a total that reached $56 billion last year, up 83%, according to the Reagan Institute. But that number far exceeds the amount of money private defense tech companies earned in Pentagon contracts: $4.3 billion last year, less than 1% of that total.

The startups are trying to follow in the footsteps of companies such as SpaceX and Palantir, whose technology already permeates the Pentagon. Aside from Anduril, which aims to make autonomous fighter jets and other weapons, some of the best funded are Saronic Technologies, building autonomous naval boats; Shield AI, developing AI piloting software for autonomous aircraft; Neros, which makes drones; and Castelion, which is building hypersonic weapons.

These companies are trying to wedge their way into a defense budget that’s largely committed to existing programs, said Tara Murphy Dougherty, who runs Govini, a Bain Capital–backed software company that helps the Pentagon track its weapons arsenal. “We’re not gonna stop funding the fifth-generation fighter jet or nuclear submarines. You’re left with a much smaller [budget for startups] than people realize,” she said.

Some startups are aiming to fill niches made obvious by the war in Ukraine, including cheap drones that traditional contractors can’t build.

One company getting increased interest is Heven AeroTech, a Virginia-based startup making hydrogen-powered drones, valued at over $1 billion. Bentzion Levinson, a former Israeli military commander who is the startup’s CEO, said the military’s needs have changed. “Drones that can drop things or launch things or kamikaze drones are really the future of this ecosystem,” he said.

But it’s still a slog for startups to win the government’s trust. Levinson’s company announced a “basic ordering agreement” with the U.S. Army for its drone last week, a type of contract that doesn’t require the military to actually buy the drones but speeds up the process if it decides to.

The Iran war, meanwhile, has given the U.S. a glimpse of how adversaries are using cheap, autonomous weapons in battle. That includes Iran’s Shahed Aviation Industries, whose low-cost drones have become its crucial weapon. “It’s far more the adversaries’ Anduril than our Anduril,” said Zakheim, referring to Shahed.

I spent last Thursday at a national security conference held by the Reagan Institute, a more establishment affair sandwiched between the VC-oriented defense tech conferences put on this month by leaders at Andreessen Horowitz and Founders Fund. Instead of Palantir’s fiery CEO, Alex Karp, who headlined Andreessen’s American Dynamism Summit, the Reagan Institute featured Michael Duffey, the low-key undersecretary of war for acquisition and sustainment.

Duffey called for more private investment in defense, but said the money should go to build more factories, finance component makers and fund supply chain resilience, even if “it’s not as headline grabbing as a new prototype and technology.” The institute gave out grades for how the U.S. was meeting its national security goals. (The quality of new defense tech startups got one of the highest grades, A–, but overall “defense modernization” received a D and manufacturing capacity received D+.)

The good news for at least some prominent newer defense firms and their investors is that military leaders want to help defense tech startups succeed. “How do we get barriers out of the way to find pathways forward for the Saronics, Anduril, Shield AI to get access to those opportunities?” Duffey said.

Anduril, for instance, won what could become its largest contract to date last week. The deal to provide software and other products to the U.S. Army could reach up to $20 billion over 10 years, although the money isn’t fully committed. Getting more such deals would support Anduril’s projections of hitting $16 billion of annual revenue by 2030, up from $2.2 billion last year.

But the vast majority of defense startups won’t “punch all the way through” to become large sellers of technology to the Pentagon, acknowledged Alex Moore, a defense tech investor at 8VC and a board member at Palantir. He said traditional defense contractors would buy struggling upstarts for “pennies on the dollar,” but purchasing those startup failures was in the national interest.

He told the audience on a panel that I moderated at the institute: “You’ll have a lot of VCs that lose a lot of money and you get a lot of free [intellectual property] on the back end that keeps us safe.”

What could save some of the investments would be the Department of War changing more quickly how it buys technology. Chip Walter, a general partner at defense investment firm Marlinspike, which has invested in Anduril, told me the Pentagon needs a “two-track approach” to buy traditional military technology both for the “high-end fight” and the low-cost approach many startups are taking.

In the meantime, “we need to stop vilifying the [prime contractors],” said Walter, who was a former director at Northrop Grumman. “We wouldn’t be doing what we’re doing in Iran without the primes.”