New Defense Tech Gets Tested

Market Overview

Geopolitics drives volatility. It has been a volatile week in the markets, driven primarily by Operation Epic Fury in the Middle East, though Friday’s weak jobs report (92,000 loss) led each of the S&P and Nasdaq to finish the week down ~1%. Bigger movers were oil prices, where Brent crude topped $90/bbl, up around $20/bbl since the war began over last weekend, and Korea’s KOSPI Index, which was down ~8% over concerns that a prolonged closure of the Strait of Hormuz would threaten South Korea’s oil imports (almost 100% of its oil is imported) and the supply chains that support key semiconductor exporters such as Samsung and SK Hynix  (Bloomberg, 3/4).  YTD, the S&P/Nasdaq are down 1.4%/2.9%. Our NPM Private Market Tracker*, which shows the average price performance of the 50 largest names in our internal Tape D® data, is up 6.8% YTD. (Bloomberg; NPM)

New Defense Tech Gets Tested

We’ve written a lot about defense in just a little over two months in 2026, but there have been a lot of headlines. Before we delve into this week’s topic, we are reminded that while it is exciting to see new defense technologies and companies showcased in real time, the military operations carried out also come with human suffering and loss of life. We want to acknowledge that and those who have sacrificed on the battlefield or borne costs as civilians.

In under a week of Operation Epic Fury, several new technologies have been used on the battlefield for the first time. The war in Ukraine has clearly been a testing ground for several years, and many innovations developed there have found their way into the Middle East this week. Drones, lasers, and precision munitions are just a few examples that we look at here.

LUCAS one-way attack drones.  LUCAS stands for Low-Cost Unmanned Combat Attach Systems. These are cheap ($35,000 per drone), one-way attack/loitering drones that have been used in swarms and coordinated volleys to attack infrastructure targets and complement manned airstrikes. (Axios, Business Insider) What’s interesting is that they were reverse engineered from Iran’s Shahed drones that were adapted by Russia and used in Ukraine. LUCAS drones are manufactured primarily by Spektreworks, based in Phoenix, Arizona, but it is an open architecture product by design in order to encourage mass production and companies like Griffon Aerospace are involved as well. (Business Insider, Company reports)

Laser defense against drones and missiles.  Israel’s Defense Ministry confirmed the first-ever operational combat use of the Iron Beam laser air-defense system to shoot down developed jointly by Israeli companies Rafael and Elbit systems and is designed to complement Israel’s existing kinetic interceptor air defenses. Videos released by United States Central Command also appear to show a new directed-energy weapon system called HELIOS (High-Energy Laser with Integrated Optical Dazzler and Surveillance) used to destroy incoming drones. (Gulf News). These laser technologies often have high fixed costs to fund the up-front construction of the system, but the per-shot cost of each laser is significantly lower than the kinetic alternatives (Britannica, Ynet News, The Conversation).

Precision Strike Missile (PrSM). These are short-range ballistic missiles for deep precision strikes. They have been fired from standard HIMARS launchers and used to hit high-value targets in Iran. Epic Fury is the first combat use for PrSM’s. (Business Insider, Axios).

AI is playing a central role. Anthropic’s Claude is apparently being used in Epic Fury, despite Anthropic’s falling out with the Pentagon last week over the use of its technology for surveillance and autonomous lethal weapons. Palantir’s Maven Smart System uses Claude and has been central to CENTCOM’s data processing and targeting in Iran. (Washington Post). Specifically, AI is being used to collapse the planning time required for complex strikes, known as “decision compression”. (The Guardian)

One more takeaway: Improved manufacturing capability is a necessity. Less than a week into the war, much has been written about inventory depletion of key weapons such as Tomahawks and Patriot air defense missiles. (Bloomberg) The DoD has been focused on encouraging rapid production of new technology and speeding up production of existing weapons from defense primes, and this conflict could highlight the need for it.

Defense tech has seen significant momentum over the last year, with defense tech VC deals reaching $49.1 billion in 2025, the highest dollar amount in at least the last 10 years (Pitchbook). With global conflicts flaring and new technologies playing critical roles, we would not be surprised if this strong trend continues.

BIGGEST MOVERS AND TOPICAL NAMES

Based on our proprietary Tape D® data, the best performers of the large cap names in the private market thus far in 2026 have been:

• Cerebras, with a +128% estimated share price As a reminder, Cerebras closed a $1 billion Series H in early February at a ~$23 billion valuation, nearly a 3x increase from its prior valuation of $8.1 billion. (Company Reports, TechCrunch)
• OpenEvidence, +62%. OpenEvidence closed a $250 million Series D in January at $12 billion, double its prior valuation. (TechCrunch)
• Replit, +54%. Replit closed a $400 million round at a $9 billion valuation in January, up around 3x from its previous valuation. (Bloomberg)
• Stripe, +27%. Stripe announced an employee tender in February valuing the company at $159 billion, up from $107 billion previously. (Company Reports)
• Clickhouse, +25%. Clickhouse raised a $400 million Series D in January at $15 billion, roughly 2.5x its previous round. (Company Reports, TechCrunch)