Shield AI, a Start-Up Making Military Drones, Raises $2 Billion

 

 

Is X-BAT drone made without Chinese rare earths, or it is just scam to milk government money with impossible to meet goals?

 

    Due to the complexity and reliance on Chinese processing equipment, many companies claiming to be independent of the Chinese supply chain are not as independent as they might seem. This situation naturally leads to some market skepticism and "doubters" regarding the feasibility of such ambitious, non-Chinese-dependent projects, especially for a relatively young airframer like Shield AI.

 

In short, claims about the drone's materials sourcing are neither confirmed as factual nor debunked as a scam yet. The general consensus is that avoiding Chinese rare earths is a significant challenge for the entire defense industry.

 

That does not hinder the intake of billions of dollars from investors:

 

“The company, which develops autonomous military technology, also plans to buy a maker of simulation software as interest in next-generation defense soars.

 

Artificial intelligence, autonomous drones and other technologies have transformed battlefields in hot spots like Ukraine and Iran. A tech-driven arms race to develop the tools has put next-generation defense contractors in high demand.

 

Among them is Shield AI, which plans to announce on Thursday that it has raised $2 billion, with some of the proceeds going toward buying Aechelon Technology, a smaller defense-tech start-up specializing in simulation software.

 

The new capital will value Shield AI at about $12.7 billion, more than double the level it achieved in a fund-raising round a year ago.

 

Shield AI’s latest money-raising effort underscores the interest in defense technology in Silicon Valley and beyond as investors rush to buy in.

 

“A.I. plus autonomy is changing the game in the military,” Gary Steele, a former Cisco executive who is now Shield AI’s chief executive, said in an interview. He added, “The capabilities that we can deliver, the cost curve that we can deliver, is fundamentally different than in the past.”

 

The role of A.I. in military applications has drawn scrutiny, especially during the Pentagon’s dispute with Anthropic, which said it did not want its A.I. used for mass surveillance of Americans or for autonomous lethal weapons. Mr. Steele and Doug Philippone, a Shield AI board member, say their company follows the Defense Department’s rules about A.I. use, and Mr. Philippone said he personally favored ensuring that humans could make the final call.

 

Founded in 2015 by Brandon Tseng, a former Navy SEAL, and his brother Ryan, a tech executive, Shield AI has become a prominent defense-tech contractor, alongside names like Anduril Industries and Skydio.

 

About half of Shield AI’s business is selling software that helps operate vehicles like helicopters, boats and drones — including an Anduril model — without human pilots. The rest is selling its own drones, like the V-BAT, a model that can take off and land vertically. Ukrainian forces have used it.

 

“The integration and development of both of those elements really struck us as a pretty unique platform,” David Mussafer, the chairman of the private equity firm Advent International, which is leading the investment round, said in an interview.

 

Part of Shield AI’s advantage, according to backers like Mr. Mussafer, is that the company can provide the best high-tech military tools at a significantly lower cost.

 

Many defense-tech companies draw their revenue largely from U.S. government contracts, but Mr. Steele said that over half of Shield AI’s revenue this year would come from international customers in Europe and in Asia.

 

While its business was growing, Mr. Steele said, Shield AI studied potential acquisitions to bolster its offerings. A name that came up was Aechelon, whose real-world simulation software is used to train both humans and machines.

 

By last year, Shield AI had enough financial muscle to seriously consider buying the smaller company, said Mr. Philippone. He is also a founder of Snowpoint Ventures, which invested in Shield AI’s latest fund-raising round.

 

Aechelon’s software is expected to help Shield AI engineers and customers quickly assess problems in new software and hardware and to provide a wealth of training data for the company’s A.I. systems.

 

It was the desire to acquire Aechelon that drove Shield AI to seek new funding, even though it still had plenty of cash, Mr. Steele added.

 

Other participants in the fund-raising included the direct-investment team of JPMorgan Chase’s Security and Resiliency Initiative, a program aimed at investments in key U.S. industries. About $500 million of $2 billion raised is in preferred equity from Blackstone, the private equity giant, that could grow to $750 million over time, Mr. Steele said.

 

Mr. Mussafer will join Shield AI’s board, and Todd Combs, who leads the JPMorgan initiative’s direct-investment group, will become a board observer.

 

Besides helping to pay for the Aechelon transaction, the new money will help fund growth and new products. That includes the forthcoming X-BAT drone, which the company describes as an armed autonomous fighter jet.

 

The goal is to keep growing — and, eventually, to seek a stock listing, according to Mr. Philippone. “We have a definitive path to going public,” he said.” [1]

 

1. Shield AI, a Start-Up Making Military Drones, Raises $2 Billion. Michael J. de la Merced.  New York Times (Online) New York Times Company. Mar 26, 2026.