Executive Summary

As a dual-use technology, artificial intelligence (AI) has the potential to transform a nation’s economy, national security, and society. Militaries across the globe, including the U.S. Department of Defense (DOD), are increasingly treating AI as a technology that is central to their long-term strategies and planning. One of the most significant paths of acquisition and integration of emerging technologies, including AI-enabled technology, into defense systems and platforms is through the largest global defense companies. As militaries around the world are ramping up their capabilities and capacity to harness AI, it is important to begin to understand the state of AI innovation within the major global defense companies.¹

With tech giants such as Google and Amazon at the forefront of AI innovation, major global defense companies are pressed to step up their innovation-related activities to keep pace with the larger commercial market. In addition to expanding their internal research and development (R&D) programs and collaborations with leading research institutes and universities, another way the largest defense companies might maintain their competitiveness in the emerging technology market is through investments and mergers and acquisitions (M&A). If done correctly, these approaches may give these defense giants a leg up against competitors that predominantly rely on in-house R&D. Looking specifically to the U.S. defense innovation ecosystem, major defense companies that invest in or acquire AI companies could potentially serve as a bridge between DOD and the commercial innovation ecosystem. In doing so, these companies might help the U.S. military adapt and leverage commercial technology for defense applications.

Within this context, this paper looks at the state of AI investments and M&A by the top 50 global defense companies—as determined by their military revenue—to further understand their use of these approaches to access external AI innovation. Our key findings include the following:

• Few of the top 50 global defense companies are investing in or acquiring privately-held AI companies. This suggests that these companies are not relying on these approaches to access AI technology in the private sector.
• Defense companies that have a corporate venture capital (CVC) subsidiary have invested more in AI companies than those without such organizations. These CVC subsidiaries also tend to make more AI investments than their parent companies.
• The largest global defense companies often bought and invested in AI companies based in the United States. Despite concerns about foreign entities leveraging American innovation, within the defense industry, U.S.-based AI companies are still more likely to receive investments from U.S.-based defense companies.

1. “The Final Report,” National Security Commission on Artificial Intelligence, Final Report (Washington, DC: NSCAI, March 2021), 7, https://www.nscai.gov/wp-content/uploads/2021/03/Full-Report-Digital-1.pdf.