The Pentagon wants $55 billion for drones and autonomous warfare in its fiscal year 2027 budget. That's up from $225 million the year before. A 250-fold increase. The money flows through the Defense Autonomous Warfare Group, an obscure office that now controls procurement, research, training, and sustainment for AI-enabled systems across all military branches.
Two conflicts forced this shift. In Ukraine and the Middle East, cheap drones have overwhelmed expensive U.S. defensive systems. The math is brutal: a $2,000 drone can destroy equipment worth millions. Defense Secretary Pete Hegseth is expected to face questions about the budget when he testifies before Congress Thursday.
The funding will split between established defense contractors and AI startups. Anduril Industries, founded by Palmer Luckey, has its Lattice AI platform and a $1 billion Special Operations Command contract from 2022. Shield AI, valued at $2.7 billion, makes Hivemind technology that lets aircraft fly without GPS or communications. Traditional players like General Atomics, Lockheed Martin, and Northrop Grumman are expanding their autonomous programs too. But they're playing catch-up. Their business models were built on selling a handful of $100 million aircraft, not swarms of cheap autonomous drones. The Defense Innovation Unit has been connecting old-guard contractors with newer entrants.
Manufacturing capacity now matters more than ever. When cheap autonomous systems can overwhelm expensive defenses, targeting enemy factories becomes more important than holding territory. For companies building AI agent systems, this is the start of a sustained flood of military contracts.