Iran war is defense tech’s chance to shine, but few systems are ready

The Iran war is redefining modern combat for the U.S. and driving demand for lower-cost tech.

It’s the exact situation Defense Secretary Pete Hegseth warned against a few months ago.

“We cannot afford to shoot down cheap drones with $2 million missiles,” Hegseth said in December. “And we ourselves must be able to field large quantities of capable attack drones.”

Two days into the war, the U.S. used up a reported $5.6 billion in munitions. Meanwhile, Iran has wreaked havoc on military bases, tourist centers and data centers used by America’s largest tech giants with swarms of low-cost Shahed drones that cost between $20,000 and $50,000, according to public estimates.

This is the moment defense tech and Silicon Valley have been waiting for. 

For years, defense tech has fought to prove itself in Washington and grab a chunk of the ballooning Pentagon budget snatched up by defense primes like Lockheed Martin, RTX and Northrop Grumman.

The war, coupled with President Donald Trump‘s military reindustrialization efforts, could offer that long-awaited catalyst.

“The world is more dangerous,” said Mike Brown, partner at Shield Capital. “Technologies that were on the drawing board a decade ago have now proven themselves on the battlefield.”

The U.S. has deployed its own version of the Shahed in Iran called the Low-cost Uncrewed Combat Attack System, or LUCAS. The drone, built by Arizona-based SpektreWorks, costs about $35,000 per unit according to industry estimates.

The Department of Defense is also reportedly in the market to buy more.

Tara Murphy Dougherty, CEO of defense software startup Govini, said LUCAS is one of the only major new systems emerging in the Iran war, but production is modest. Most U.S. air capabilities in Iran have been with traditional fighter jets and bombers.

In counter-drone tech, Aerovironment this week announced the Locust X3 laser system, which the company claims will cost under $5 a shot. Contractors Lockheed Martin, RTX and Leidos also offer solutions.

Taser maker Axon entered the sector in 2024 with its Dedrone acquisition. Startups Anduril and Epirus are also scaling counter-drone warfare capabilities.

Despite their real-world applications, these tools accounted for only $4.7 billion of the fiscal 2026 budget. That’s according to data from Obviant, an intelligence startup that focuses on defense acquisition, contracting and budgeting data. 

“America was built on competition, so let’s be competitive,” said Brett Velicovich, co-founder of Powerus, a drone company backed by Trump’s sons. “Let the companies that have the best technology win, because it’s only beneficial to our country.”

Major defense tech winners so far include Oculus-creator Palmer Luckey’s Anduril and software AI company Palantir. Both recently signed multibillion-dollar-ceiling contracts with the Pentagon.

Palantir’s tools are already deeply ingrained in the DOD, and CEO Alex Karp alluded to the fact that…