The Next Wave of Directional Investingt: The Military Industrial Complex Becomes the Military AI Complex

Maybe we should call it the Military IndustrAIl Complex.  On May 7-8, the mammoth Washington Convention Center played host to the AI Expo for National Competitiveness.  It was sponsored by the Special Competitive Studies Project, the brainchild of former Google CEO Eric Schmidt.

So for sure, all this has a good tech pedigree, and yet the Expo had a specific purpose: To encourage AI innovation, and AI-related investment, to go into the defense and national security sector.  And that, in turn, sends a clear signal to Directional Investors: This trend can be your friend. 

In tech circles, linkage to the “military industrial complex’ is not without controversy.  To be sure, the origins of tech are closely entwined with the Defense Department, including the legendary DARPA, and yet at the same time, the Bay Area culture that helped give rise to the unique vibrancy of Silicon Valley has long leaned left, hostile to what it sometimes called “the war machine.”  Back in 2019, Google rejected working on the Defense Department’s AI-based Project Maven.  (By then, Schmidt was long gone from the CEO position at Google, he served from 2001 to 2011.) 

Google’s departure from defense work was in keeping, of course, with the rise of “wokeness” in Silicon Valley and Big Tech overall.  Such wokeness opened cleavages across all of corporate America and American society.  Yet the separation of cutting-edge tech and national defense was perhaps most acute, as it posed a threat to American national security. Whatever the political sensitivities of techies, the United States, and its allies, needs to be defended. 

Happily, some tech companies, notably Palantir, stepped in to fill the breach.  Palantir chief Alex Karp has been outspoken in his championing of American interests, including, recently, support for embattled Israel.  Along the way, he has derided wokeness as the “central risk” to the United States, and offered his company, now based in Colorado, as a positive counter-example. 

So it was not surprising that Palantir was the most prominent exhibitor at the AI Expo in D.C.; Karp himself was a featured speaker.  No doubt some tech types are still hostile to DOD, and yet the plethora of exhibitors—including local-area colleges, such as American University, the University of Virginia, and Virginia Tech—suggests a useful closing of the cultural chasm.  Here, to mix a metaphor, the woke wave is definitely ebbing. 

Indeed, the underlying theme of the whole Expo was that American national security rests on a foundation of tech competence, including, of course, AI.  As Politico’s Mohar Chatterjee observed on May 9, “The gap between Silicon Valley and DC is shrinking, in no small part due to Schmidt’s matchmaking efforts in the name of an international AI dogfight.” 

The words “international AI dogfight” are a clear reference, of course, to rival countries—most notably, China—that have their own ambitious AI programs, as well as international objectives that might run counter to those of the United States.  

The U.S. is the clear world leader in AI—the most innovation, the most investment, the most prominent companies.  So now, if that tech capacity can be smoothly integrated into national defense, the nation can face the future with confidence.  Guarded confidence, to be sure, but still, confidence. 

And along the way, investors should see a clear path: Since it’s true what they say: The trend is your friend, we can see a clear trend: A bull market in the AI-defense sector.  And given the overall size of AI as it burgeons in the 21st century, that’s bullish, indeed.  

But of course, for every trend, there’s a counter trend, including bearishness.  And so I can report, after spending two days at the conference, that the big-name “prime” defense contractors were at most a minor presence.