SpaceX’s Falcon 9 rocket launches 21 Starlink satellites at Launch Complex 39 at Kennedy Space Center on December 23, 2024 in Florida, USA. Image Source Visual China
Written by Wen Shijun Edited by Yue Jiachen From Prism Tencent Xiaoman Studio
Wen Shijun Editor Yue Jiachen
Prism Tencent Xiaoman Studio
Becoming a long-term supplier to the Pentagon is a huge business.
The defense authorization bill voted by the U.S. Senate on Dec. 18 shows that the total cap on U.S. defense spending for fiscal year 2025 reaches $895 billion, or about $6.5 trillion . Of this, the portion at the disposal of the U.S. Department of Defense is up to nearly $850 billion.
It can be referred to, the International Monetary Fund IMF data released in April, Israel UAE, the two rich countries in the Middle East, the annual GDP in 2023 are in the region of 500 billion U.S. dollars.
Putting the military in the hands of the people, the U.S. defense industry is dominated by private big business.
Since the end of the Cold War, after many rounds of mergers and reorganizations, the Pentagon gradually formed a Lockheed Martin Raytheon Boeing and other military giants mainly supplier pattern. At the same time, U.S. defense procurement has often been criticized as slow-moving and anti-competitive, favoring a handful of long-established companies.
Now that list of suppliers could include a very hot name, Elon Musk’s SpaceX.
The Rise of a New Force in the U.S. Military Industry
There are new forces in the U.S. military industry.
According to the Financial Times, Palantir Technologies and Anduril Industries are leading a coalition of technology companies to participate in the Pentagon’s defense budget bidding.
Compared with the Department of Defense’s centuries-old friends, these two defense companies are youngsters from Silicon Valley.
Palantir’s core business is intelligence analysis, defense software and military intelligence, and its biggest customer is the U.S. government, with which agencies such as the Central Intelligence Agency (CIA) and the National Security Agency (NSA) work.
Palantir was founded in 2003 in Palo Alto, in the heart of Silicon Valley, by Peter Thiel, co-founder of PayPal, an online payment platform, and in 2020, Palantir IPO’d on the New York Stock Exchange.
Since the beginning of 2024, Parantir’s stock price has quintupled to a total market capitalization of $183.7 billion, significantly outpacing Raytheon’s $155.2 billion, the highest market capitalization of any traditional military company, on the back of confidence in the future of AI for the military and continued growth in the company’s reported profits.
In September 2024, as its stock price continued to rise sharply, Palantir was added to the S&P 500 index, becoming a large-cap blue chip In November, it moved its listing to the NASDAQ market, where technology stocks are more concentrated.
Another Anduril Industries company, based in Costa Mesa, California, was founded by Palmer Luckey Palmer Luckey, born in 1992 .
In 2012, Palmer Luckey launched the Oculus project, a head-mounted VR virtual reality monitor, on a crowdfunding website. 2014, as a benchmark hardware vendor in the then-hot meta-universe, Oculus was sold to Mark Zuckerberg, founder of Facebook, for $2 billion, and Palmer Luckey, who was under 22 at the time, joined Facebook.
In 2017, Palmer Rach left Facebook and founded Anduril, which specializes in the research, development, and production of drones, drone interceptors, unmanned submarines, and other products and related technology systems.
Unlike the traditional military industry, which relies on pre-signed contracts from the military and has a huge product portfolio with a long design and production cycle and high costs, Anduril has taken a different approach. Its products are small, inexpensive and smart, and it produces and develops its own software and sells them directly to customers, with an operating model that can be likened to that of a cell phone manufacturer.
In fact, this model also allows the company to beat many large traditional military enterprises, and get a lot of military orders.2024 August, Anduril completed the $1.5 billion F round of financing, the valuation reached $14 billion.
It is worth mentioning that Anduril’s founder Palmer Rach has another label on him Silicon Valley’s most famous Trump supporter .
According to the Financial Times, a number of well-known technology companies are in talks to join this coalition of Defense Department military contract bidders led by Palantir and Anduril, including SpaceX OpenAI ChatGPT parent company Saronic Autopilot Ship Company and Scale AI Artificial Intelligence data analytics company, among others.
Only this year, OpenAI lifted the ban on the use of its AI tools for military purposes in its terms of service, and on Dec. 22, Trump just named Scale AI Managing Director Michael Kratsios Michael Kratsios as director of the White House Office of Science and Technology Policy.
Sources say the coalition of tech companies is attempting to break the oligopoly of the U.S. Department of Defense’s major prime contractors and become the next generation of defense contractors.
Interestingly, the names of both companies, Palantir and Anduril, come from the Western magical masterpieces The Lord of the Rings Palant r is the indestructible wizard’s crystal ball made by the elves, and And ril was once the holy sword that chopped off the supreme ring from Sauron’s hand, and belonged to Aragorn, the heir to the throne of the kingdom of mankind, after it was recast by the elven blacksmiths.
On December 6, the two companies announced that they will integrate their respective military software systems and promote deep compatibility of their products, with the aim of transforming leading U.S. artificial intelligence technology into next-generation military and national security capabilities.
The space race has become the race of the tech world.
It’s no surprise that SpaceX is on this list of Silicon Valley’s military-industrial alliances.
Back in 2017, SpaceX was already involved in the military. In March of that year, SpaceX successfully launched its first large liquid-fueled rocket propelled by a recoverable engine. In May of the same year, SpaceX’s Falcon 9 rocket carrying the military reconnaissance satellite NROL 76 successfully lifted off to deliver to a predetermined low Earth orbit. This was SpaceX’s first mission for the U.S. National Reconnaissance Office (NRO), the intelligence agency of the U.S. Department of Defense, and the first contract with the U.S. military.
For the previous decade, U.S. military and national security satellite launches had been undertaken by ULA United Launch Alliance, a joint venture between Lockheed Martin and Boeing. SpaceX, on the other hand, is mainly engaged in non-military business such as supply transportation to the International Space Station and communications satellites.
For this reason, Elon Musk had sued the U.S. military for signing a sole-source contract with ULA, and shortly thereafter, bids for military rocket launches began to be solicited.
SpaceX’s valuation, meanwhile, topped $20 billion for the first time in 2017 and plummeted in the following years.
In 2023, SpaceX made a strong entry into the spy satellite manufacturing sector, which was previously dominated by traditional Department of Defense contractors such as Raytheon Northrop Grumman Northrop Grumman.
In October 2023, the Pentagon’s U.S. Space Force, USSF, opened a public tender for rocket launch programs and planned to release $5.9 billion worth of launch orders by 2029. in October 2024, USSF announced the results of its first bids, with all nine missions valued at $733.6 billion going to SpaceX for a contract worth $730 million.
In response to SpaceX’s exclusive bid, the PAF explained that it was the only company that could immediately provide a rocket that met the load requirements.
It is worth noting that in recent years SpaceX’s main competitor, ULA, has been using the Vulcan rocket engine from a company called Blue Origin. Blue Origin is owned by Jeff Bezos, the founder of Amazon, a celebrity who also comes from the world of technology.
In explaining SpaceX’s first program wins, the PAF also noted that other companies, including Jeff Bezos’ Blue Origin, may be able to meet the rocket requirements in subsequent bids.
From this perspective, the space race in the United States in the 1920s of the 21st century , has been the race of the technological world.
In the eyes of U.S. investors, SpaceX has long been known as the two largest military unicorns, along with Anduril Industries. Although the main business is different, the former for the rocket, the latter for the drone, but the two have in common is that they rely on technology business model, in the traditional defense industry, the high cost of inefficiency predicament in the breakout, try to break the inherent pattern of the U.S. military market.
But SpaceX’s valuation is much larger.
In mid-December this year, SpaceX decided to buy back $1.25 billion worth of stock from insiders at $185 per share. Being an unlisted company, SpaceX enables its share-holding employees and other shareholders to liquidate their holdings through such buybacks.
What’s more, at this buyback price, SpaceX’s valuation soared to $350 billion, or about 255.37 billion yuan. This not only surpasses Palantir, which is currently the largest publicly traded military company, but also surpasses OpenAI, an artificial intelligence company, to become the world’s largest unlisted company and the largest unicorn in human history.
For that buyback last December, SpaceX priced at $97 per share, valuing the company at $180 billion. In a year’s time, the valuation has nearly doubled.
Changes in SpaceX’s valuation in billions of dollars . Image source Plotted from publicly available market data.
How did SpaceX’s valuation go through the roof?
In that space age of the 20th century, when man landed on the moon, spaceflight was an endeavor full of magnificent idealism, but often at no cost.
In the 21st century, what SpaceX and many commercial space companies have done is to turn space exploration, the space arms race, into a business Consider the inputs and outputs, and make money in order to continue to thrive.
Prior to this, most parts of rockets were discarded after launch, resulting in the need to remanufacture a large number of expensive parts for each launch. Essentially, SpaceX’s advantage in large-load, reusable rockets is a cost advantage.
In addition, SpaceX, whether from the universality of parts and standardized design, or from the production cycle and upstream and downstream management, has the two guides of cost reduction and simplicity and reliability, which are the key to get orders in the tender.
In October this year, SpaceX’s large-carrying interplanetary spacecraft StarShip fifth test launch, the spacecraft can carry more than 100 tons of equipment or 100 people. Propelling the StarShip into the air is a 33-engine rocket booster 20 stories high, providing twice the thrust of NASA’s Artemis rocket, the most powerful rocket ever built by mankind.
But the biggest technological breakthrough was in the recovery technology.
During this test launch, after completing its mission of lifting the spacecraft into the air, the massive rocket booster ran out of fuel and fell off, but instead of crashing into the ocean, it returned to the vicinity of the launch site, where it was caught in mid-air by two giant metal pincer structures SpaceX calls chopsticks, and parked back on the launch pad known as the Mechanical Godzilla Mechazilla.
Elon Musk also excitedly posted on social media that Mechazilla has caught the Super Heavy Booster! Mechazilla has caught the Super Heavy booster
On October 13, 2024, SpaceX’s Super Heavy rocket booster returned from launch and was captured by Mechagodzilla’s chopsticks. Image Source Visual China
The video of the chopstick catching the rocket has also been reposted countless times on video platforms and social media around the world. Market confidence and expectations, as well as SpaceX’s valuation, have risen amidst the gasps of amazement.
Another result of low-cost rocket launches is SpaceX’s satellite-based Internet service Starlink. As of December 2024, the cumulative number of satellites in low Earth orbit launched under the Starlink system has reached 7,568, with 6,690 still active. Overall, SpaceX’s satellites, account for two-thirds of all satellites in orbit worldwide because it costs this company less to send a satellite into the sky.
Aerospace investment research organization Quilty Space’s latest report shows that the star chain business is expected to earn $7.7 billion in 2024, and is expected to increase to $11.8 billion in 2025, and the market predicts that the star chain’s contribution to SpaceX’s revenue in 2024 will exceed that of the rocket launch business, and will become a more dominant point of profitable growth.
Starlink Starlink under the business Starshield specialized in serving the military. 2023, the U.S. Space Force announced that over the next ten years will be purchasing $900 million from 15 providers, including SpaceX, for low-Earth orbit satellite communications services.
In October of this year, the New York Times reported that $500 million in spending had been promised for this procurement, with the vast majority of the money going to SpaceX.
And of course, there’s the logical consequence that with Trump elected as the next president of the United States, shares of his good friend Musk’s companies have risen in popularity. Tesla shares are at an all-time high, and even Musk’s artificial intelligence company xAI, which he just founded in 2023, is valued at $50 billion.
Not to mention SpaceX, which is always in the spotlight.
This article is copyrighted by Tencent News, please leave a comment at the end of the article if you need to reprint it, and it can only be reprinted with permission.
Issue 1354
Operation Typesetting Wenwen
Click on the original article to view exclusive articles related to Tencent News Client!
Are you looking at me?
Leave a Reply