Takeaways from Tectonic

Market Overview

Central banks pause while the war carries on. It was a choppy week for markets. They started out strong in spite of the Iran war, but then gave back gains on Wednesday and Thursday as the Fed held rates steady and oil prices resumed their climb owing to attacks on energy infrastructure as a result of the war. In addition to the Fed’s decision, the Bank of Canada, the Bank of Japan, the ECB and the Bank of England all elected to hold rates steady as they await how the war and its effect on inflation plays out. YTD, the S&P/Nasdaq are down 3.7%/4.9%. Our NPM Private Market Tracker*, which shows the average price performance of the 50 largest names in our internal Tape D® data, is up 7.7% YTD. (Bloomberg; NPM)

Takeaways from Tectonic

We attended the Tectonic defense summit in Austin, Texas last week and include a few takeaways below. We note that all conversations and “polling” noted are based on small sample in person limited audience conversations and should only be taken as informal feedback.

Focus on manufacturing capacity for the US defense industrial base. We’ve written about how the DoD has altered its procurement philosophy to move away from few, exquisite platforms toward a commercial-first focus on attritable mass – i.e. large numbers of cheap, expendable and often autonomous systems. This has opened the door to non-traditional vendors beyond the defense primes, and the number of startup companies looking to manufacture hardware (drones, ships, etc.) for the US defense industrial base has skyrocketed. But manufacturing is hard to do, especially scaling from a prototype to an LRIP (low rate initial production) and then to commercial production. There was a lot of focus at the conference as to how to ensure that the US builds out its manufacturing base to support these companies. Supply chain stability and quality, including compliance with an array of rules and regulations regarding defense procurement, and systems received a lot of attention.

Anduril COO Matt Grimm noted in an interview that the company is focusing on version control, tooling and systems as it scales up. Hadrian is an example of a company working to build AI-powered factories for defense products to supply a number of companies. Divergent combines AI-optimized structural design, 3D printing and robotil assembly to produce full airframes, missile systems, drones and USVs (Tectonic, PR Newswire, Breaking Defense). Nominal, started by Anduril alumni, provides a hardware testing and data infrastructure platform to accelerate defense hardware testing cycles. Integrate provides a secure project management and collaboration platform built specifically for classified, multi-entity defense programs (Techbuzz, Tectonic, Company reports). It’s good to see companies working to take on the challenge, but whether the US is ready to manufacture was a big topic of conversation.

Drones: Fiber-optics, range, and volume are key. With the war in Iran and Ukraine showing how rapidly drone warfare is evolving, panelists from drone companies noted that having a long range and being fiber optic-enabled are key attributes for drones now. Many drones in Ukraine now are connected to “hair-thin” fiber optic cables that allow them to operate despite RF jamming (Financial Times). The Shahed (Iran) and LUCAS (USA) drones being used in the Iran conflict show that cheap, high-volume drones with long range are becoming a key part of modern warfare. On their panel, Neros highlighted its goal to scale to 10,000 drones per month, while Firestorm highlighted its ability to manufacture drones on the battlefield in shipping containers. We also heard the view that Ukrainian drone manufacturers could pose a threat to western manufacturers if they incorporate in the US/Europe and, with their battlefield and production experience, compete for business in these regions. Swarmer, which went public this week, is an example of this.

There was discussion about whether sheer numbers are the endgame for drone warfare and where that stops. Interestingly, General David Petraeus wrote in Foreign Affairs last week that while the US will have to build up its drone manufacturing base, it will be critical to develop new doctrines, organizational structures and military training programs to win in autonomous warfare.

Maritime autonomy also in focus. While more panel discussion focused on drones, Saronic had a full-size model at the conference and there was discussion about the development of autonomous surface and underwater maritime capabilities. Saronic explained how it started with small vessels in order to get hours under the belt for its autonomous systems, while Vatn Systems explained its evolution to apply the same attritable, low-cost swam logic that has been applied to air and surface vehicles to undersea vehicles.

China-Taiwan conflict in the back of people’s minds. Interestingly, we polled people we spoke to about whether they expected a conflict between China and Taiwan to occur before 2029 or in 2030 and beyond. Well over half of the people we spoke to expect one before 2030 owing to the military build-up we have seen from China thus far, the impact of the war in Iran on US munitions supply and readiness, as well as domestic politics in both the US and China.

Are we in an investment bubble? There was a panel and much discussion “on the sidelines” about whether we are currently in a bubble for defense investing. A few panelists and people noted that they do not believe we’re in a bubble from a demand perspective (and that defense demand isn’t that cyclical overall), but that valuations can certainly be cyclical and that many current valuations will not persist.

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 +162% estimated share price Cerebras announced a deal with Amazon on March 13 to offer its AI chips on Amazon’s cloud platform (Reuters, 3/13).
Replit (+66%)
Neuralink (58%)
OpenEvidence (+45%)
Clickhouse (+33%)
Stripe (+25%)

RECENT EVENTS

Kalshi was sued by Arizona’s attorney general, who said its prediction market illegally allows election betting in the state (StrictlyVC, 3/17).
A syndicate of banks led by JP Morgan have halted a $5.3 billion debt deal for Qualtrics owing to investor concerns about AI disrupting software (Bloomberg, 3/17).
OpenAI signed a new contract with Amazon Web Services to sell its AI to US government employees (The Information, 3/17).
OpenAI and Anthropic are each pursuing deals, potentially structured as JVs, with private equity companies to embed their AI technology at portfolio companies (Axios, 3/17).
The SEC is reportedly considering a proposal to eliminate quarterly reporting requirements (Pitchbook, 3/17).
Meta reached a deal to spend $27 billion on Nebius Grouip’s AI data centers over the next five years. Also in data centers, Nscale has agreed to buy the developer of one of the largest US AI data center sites in West Virginia (The Information, 3/17).
The Trump Administration will get $10 billion in payments from investors in a company designed to safeguard the user data of US-based TikTok users (Wall Street Journal, 3/13).

NOTABLE CAPITAL RAISES

Rare earths magnets startup Vulcan Elements is raising a $550 million round at $2 billion (Pitchbook, 3/19).
Xbow, an autonomous offensive security startup, raised a $120 million Series C at a valuation of over $1 billion (Axios, 3/18).
Advanced Navigation, an Australian developer of navigation and autonomous systems, raised a $110 million Series C (Axios, 3/18).
Cambridge Aerospace, a British defense startup, is in talks to raise $200 million at a $1 billion valuation (Pitchbook, 3/18).
Cloaked, a consumer-focused privacy platform, raised $375 million (Axios, 3/19).
Frore Systems, a data center cooling startup, raised $143 million in Sseries D funding at a ~$1.6 billion valuation (Axios, 3/17).
General Matter, a startup specializing in nuclear fuel enrichment, is raising a $500 million round at a $2 billion valuation (Axios, 3/17).
Sunday, which makes autonomous robots for household chores, raised a $165
Kraken, a crypto exchange, has paused its IPO plans (Axios, 3/19).
Mastercard agreed to by BVNK, a stablecoin payment startup, for $1.8 billion (The Information, 3/18).
Ramp, a corporate card and expense management platform, acquired Juno, another travel and expense management platform (Axios, 3/18).
Merlin, a defense-focused flight autonomy company, went public after merging with a space and raising ~$200 million in proceeds (Tectonic, 3/18).
Swarmer, a Ukrainian drone software company, went public and saw its shares rise more than 1,000%, albeit on a very thin float (Yahoo Finance, 3/18).
AeroVironment acquired drone maker ESAero for $200 million (Tectonic, 3/18).