Defense tech investment boom sparks bubble warning as private equity pours
Private equity firms are pouring billions into defense technology as rising military spending and geopolitical tensions fuel an investment boom.
Traditional buyout investors are increasingly backing younger, high-growth firms in the sector, according to PitchBook data, with private equity growth investments in defense reaching $4 billion in the first nine months of 2026, up from $500 million in 2024.
As defense tech companies mature, analysts say private equity, debt and other forms of financing are expected to become more important in bridging the gap between innovation and industrial-scale production, as venture capital alone may not be enough to finance companies’ expansion.
It comes as geopolitical tensions, wars, and countries’ efforts to strengthen military capabilities are creating opportunities for companies developing everything from autonomous drones to missile defense systems and satellite technology.
A survey of 250 senior decision-makers at U.K. defense companies by law firm White & Case found that 97% expected their businesses to seek significant external funding over the next 12 months.
“Private capital is now playing a critical role in the financing of defence technology companies,” Daniel Turgel, a partner at White & Case, told CNBC.
Private equity and venture capital firms, sovereign wealth funds and family offices were all looking to invest more in the sector, marking a significant change from just a few years ago, Turgel said, adding that many investors were previously reluctant or restricted from doing so.
A new class of investors
The growth of private equity allocations to defense technology also comes amid a surge in venture capital investment in defense technology. Startups across NATO and allied countries raised $27.1 billion through September, nearly double the total for all of 2025, according to an October report from Dealroom and Resilience Media.
While venture capital traditionally backs young, high-growth startups, and private equity focuses on more established businesses, the distinction is increasingly blurring as some PE firms move into growth investments.
“Private equity firms are putting more money into defense, and they are changing how they do it,” Jim Corridore, lead industrials analyst at PitchBook, told CNBC.
The number of defense PE growth deals increased from 15 in 2024 to 31 in 2025 and 48 through September 2026, according to PitchBook.
Those investments accounted for 41% of defense PE deal value in 2026, up from just 3% in 2024.
“It is clear to me that PE is moving into territory VC used to own,” Corridore said.
Private equity firm Advent International announced a commitment of up to $1 billion to next-generation defense technology in March, including investments in autonomous systems developers Shield AI and Saronic.
Shonnel Malani, Advent’s managing partner and global head of aerospace and defense, told CNBC the firm has already deployed roughly three-quarters of that commitment.
Malani said Advent’s expansion…
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