"Bloomberg Tech" is live from the heart of Silicon Valley, with and in San Francisco.
Welcome to a special edition of "Bloomberg Tech," live from Skunk Works, Lockheed Martin's advanced aircraft development site in Southern California. Today, we discussed with some of the biggest names in this booming industry, from the conflict in Iran and competition with China to working with the U.S. government.
AI's role in the future of warfare. We start with one of the most profound changes for the defense tech industry: how it's doing business with the Pentagon. It used to be defense companies competed for contracts based on requirements set by the government.
Now, Lockheed Martin's CEO wants to pitch that technology before the U.S. government comes asking. I sat down with him to discuss that and much more.
Typically, the U.S. government would set requirements. The armed services would set requirements and say, 'I want a new plane that goes this speed at this altitude, can carry this much equipment and weapons, whatever,' and here is a 500-page set of requirements that we have a divide that we want you to design to.
Two or three of us would get requests for information: 'Can you do this? What are these requirements going to take to create? What's it going to cost?' Then there would be a bunch of input back from industry, and then a request for proposal: 'Who wants to step up and try to do this?' Extremely well-defined requirements at that.
And then there would be two or three bidders. Selected to one, usually the lowest-cost provider that was technically qualified, would get the job. Then it would take years to actually create that capability. What is different now is that the current leadership in the Pentagon has decided to take the straitjacket off the companies, which allows us to take the straitjackets off of our engineers and scientists to allow us to be flexible, to propose solutions, do prototypes. We go out in the field, and the field could be the Pacific Ocean for us, and we test prototypes on actual ships with sailors that are stationed on the ships running the prototypes to see if it works.
Then we will come back with that, or an Army test range. We actually shot some of our missiles out of our launcher, showed the Army, had their people operate it. It worked. We have this integration capability now. The straitjacket is off the companies and the industry. We welcome the new entrants, the startups. We want that creativity, so we can learn from it.
If somebody can do Fortem at a better size and shape and cost than we can, we want to bring that in quickly. We welcome those investors, we welcome that talent, we welcome that technology. We want to integrate it into our mission sets. We can be the subcontractor, too. If someone has a better mission solution than we do, we would love to put the F-35 into that profile. So this can go both ways, actually.
So this can go both ways, actually. Ed: What is Lockheed Martin's strategy? How core is AI to that technology roadmap?
Very fundamental to the company and everything we are doing. Our chief engineer, when I started at the company in management six years ago, said AI is really critical. We had to invest in our own AI, containerized, where we are not going to be using models and then feeding our information back into the system.
We would have a controlled environment for our AI workloads. One of our partners in the technology space has been Jensen Huang. Back in 2000, 2001, before anyone had heard of NVIDIA if you were not a gamer, we were teaming up with them to get GPUs. That relationship continues today. We have our own GPUs, our own platforms. We host AI models on our own platforms and our own GPUs. We use only data that we generated or get from the U.S. government, and that we can create AI-driven solutions to many of those mission sets we talked about earlier.
That was my conversation with Lockheed Martin CEO Jim Taiclet. You can find the full video online at Bloomberg.com and on YouTube. For more than 80 years, Lockheed Martin Skunk Works has helped to define the cutting edge of American airpower. We are live from the storied operation with its former leader OJ Sanchez, who now runs their $30 billion-plus aeronautics business. We should start with Skunk Works. You lead this team, this culture, this place for some time. You still work so closely with them. Where are we? What goes on here?
First, welcome to Skunk Works. I hope your team is enjoying the mystery and the magic that is here. Skunk Works, for 80 years, has existed for the purpose of delivering on urgent national security objectives. We are continuing that mission, which matters to all of us. In this moment, like we have heard, nations need to go faster. They need us to bring capabilities to the fight, and it turns with speed and with an interoperability purpose that only Skunk Works has delivered on in the past.
So much familiarity with the F-35 from the American public, the world, manned fighter. But Vectis is the autonomous craft born out of Skunk Works. How does that work, being an idea to capability, deployment?
Core to delivering on the security objectives is knowing what our customers need well ahead of time. The F-35 was actually invented here at Skunk Works, now being produced in the Fort Worth Aeronautics. Vectis is similar, comes from a long DNA of your own development we did starting in the 1960s all the way to now.
Sorry to interrupt. In the 1960s, there was work on drones?
It's a great Skunk Works story. If you go back in the past, the U.S. and the Soviet Union signed a treaty that said we will not fly manned flights over each other's country. Immediately, the CIA came to Skunk Works and said we need to fly over the country. Out of that was born the D-21, flew at Mach 2 as a drone in the 1960s, and now that heritage we find behind us in the Lockheed Martin Vectis. Vectis is bringing together the ability to design and develop advanced hardware with advanced capabilities in the software and open architecture that will come alongside the F-35 and create the future of air dominance.
This is being internally funded, Vectis. But is Vectis the next big aeronautics franchise for the company, irrespective of whether there is a human in that platform or not?
Vectis represents us understanding our customers' problems and the challenges that we will see in air dominance and getting ahead of that. We like to say at Skunk Works, only one miracle per program. The reality is we have to burn those miracles in order to land a program like Vectis. While it appears new to the public, we've been working on the pieces of that. As far as the franchise goes, we've been investing in technologies that will build this incredible CCA for a long time, and now we are getting out ahead of requirements, listening to the global demand for these. We see that capability in this lethal, survivable, adaptable airplane that we are building to come alongside the incredible work that the fifth-generation platforms, both the F-22, have proven valuable.
How much does a program like that cost? How much is a ticket in dollar terms?
It takes incredible commitment. At Lockheed Martin, we are committed to invest ahead in order to be able to deliver on the solutions. While the exact numbers are less important than the commitment—
We are focused on those things that we think will matter the most and listening to the global need for this capability. We are investing to make sure it's ready.
The reason I ask about the next truly major aeronautics franchise, if you think about the U.S. aircraft programs, some of them have gone to your rivals. Is Vectis a response to that, or in isolation? Something different to the F-35 program entirely?
What I see for the future of air dominance is actually not a singular platform. It's about the family of systems, and platforms are going to be able to connect across domains, from space through the air down to the sea, to all the shooters. Vectis is not in response to any particular competition. What it is is the realization of what will be required to deter, fight, and win in the future. I believe that what you see behind you is where we are going to start adding capability to the family of systems. And programs like the F-35, people don't realize, there are 1,350 F-35s already out in the world today in combat. That fleet is growing. U.S. and allies. That fleet is growing at 160 a year. When we add the capabilities like Vectis, we have shown it can be controlled by a single F-35, as many as eight Vectis by a single pilot. Imagine the mass and scale of a program like that. Yes, we see this future family of systems underpinning every generation of products that we have.
Project Meridian is the big news for your industry. In simple terms, Secretary Hegseth deciding a 120-day effort to do the same thing that you have pitched: come and get ahead of the threat, come with proposals. Elon Musk is involved, Palmer Luckey. Your response to it, interpretation of it? Similar to what you say you are doing.
I appreciate the leadership that Secretary Hegseth has, looking at Project Meridian and the changing nature of warfare. But we should see and learn from the conflicts we have and how we best prepare for the future. Here at Lockheed Martin, we are always in the posture looking ahead. What Project Meridian will do, we talk about that big tent. I am in and out of the Pentagon every week sometimes, so we work directly with the Department of War as well as the agencies to help envision this. Meridian will help to open up that tent to enable others. Here at Skunk Works and across our Lockheed Martin organizations, if we find something, we will pull that into the bigger tent to deliver capabilities.
This is the question that I got from the tech audience. Let's say there is a close air support mission, Vectis involved. There is not a contract yet, but how does that work in real terms? For the everyday person, what are you talking about there?
I used to get to fly these airplanes. I flew the F-22 in the past. Fifth-generation airplanes have what is called sensor fusion, where you can see the entirety of the battle space in front of you. What you are usually limited by is the ability to get others to see it, or have enough weapons or ability to get to every place.
What Vectis will do in a situation like that, it will extend that capability, that incredible fusion and decision advantage, into actionable capabilities, whether that be an air-to-air mission, air-to-ground mission, or sensing mission. Vectis, as an accoutrement to the others, will make everyone better and enable that force of action to happen at a much wider area of responsibility, which will be a tremendous help to the warfighter.
Under the curious news story is NASA bringing back the SR-71. Are you going to help them with that?
For those who don't know, also invented at Skunk Works. If you have not seen it in a while, I encourage you to look. Incredible airplane, flew at unbelievable speeds. Here at Skunk Works, 97% of the portfolio is classified. I would love to see the SR-71 fly again. We will have to see what NASA chooses.
Bloomberg Tech did a good job getting into the building, but I appreciate the classified nature of a lot of the work that goes on here. It's been fascinating to speak with you, OJ Sanchez. Thank you very much. Thank you to the team for having us here. There's a lot more to come. We are going to speak to Jon Gruen, the CEO of Fortem. This is the big tent idea. That is next. This is "Bloomberg Tech."
Despite the growth of venture-backed defense tech firms, defense primes still receive a third of U.S. military contracts. These figures are from 2025, but it's held around that rate for about 10 years. The primes are not ignoring what the startups can offer and are increasingly partnering with them. Like when Lockheed needed a new radar system for a new containerized launcher.
We said we need a mobile, relatively inexpensive radar to go along with this amazing system. One of our venture investments, called Fortem, builds those kinds of radars. We put another $25 million into the company and said, 'Here is the mission. We need a radar with this weight, this form factor, this battery life. If you think differently, like a technology company would think, and constantly improve what you have, add the new hardware when it's ready, you can continuously improve the mission capability.'
Fortem CEO Jon Gruen joins us now. Breaking news over the last 24 hours: $50 million Series B, Lockheed participated in that. That is a sizable round. What do you need that capital for? Congratulations.
I appreciate it. We absolutely needed to continue to scale. We are doubling manufacturing this year, doubling our bookings, adding 250% of floor space, and all of that requires capital to do.
Let's go to the case study that Lockheed CEO Jim Taiclet just outlined to me. They approach you, they like your technology. How does that then work, the mission, the plan?
Great partnership with Lockheed Martin. It started on the venture side. Earlier in our stage, we engaged with the venture team. They really validated our core technologies, and then once they had done that, put venture money into us, then we had exposure to the rest of the corporation. We were able to find the right projects for our technology to be applicable to. Over time, that has grown, and we have done a number of projects and products that have real traction in the market. This current investment is really a reflection of that, the market traction of the capabilities of our integrated products.
We are here in Skunk Works in the United States, California. I appreciate that. What is happening in Europe and Ukraine, the war in Iran, drones and warfare? That is the learning, I think. That is what I'm hearing from this Pentagon and from Jim himself. Where does Fortem fit in that?
We are instrumental in that. We have been in all of those war zones for four to five years. We have learned all of those hard lessons. We are very out in front and rapidly developing the technologies and products that are going to be the forefront of warfare in the future.
That data I shared, deliberately put together. Is that different from counter-drone spending? There is a distinction in those programs.
To date, drone and counter-drone are different budget line items typically, different customer statuses. It is a dynamic of the market, but it is a cat-and-mouse game in some sense. Rapid development on the ground threat offensive side, you have to be out in front on the defensive side. Defensive typically means layers to be effective. It is not a one-for-one, it is a layer of solution, sensors, effectors, to really be ready for any of those dynamic threats.
You are an American company. How are you able to do business with our NATO allies?
Partnerships. Whether it is Lockheed Martin internationally or some other partnerships. Basically, any customer today, if you have a best-of-breed product, if you have the right product, they will buy from you. We are definitely looking to make sure that we have enduring partnerships around the world that allow us to continue what we have built there, but it ends up being, you have to be the best.
What happens next? What is your priority for growing this company?
Exactly that, staying ahead of the demand on products. We have to deliver scale that we have never done before. At the same time, staying ahead of that offensive threat curve. We have to make sure we are taking the data, applying it into our new products, and having the partnerships to deploy at scale.
Jon Gruen, CEO of Fortem, just closed a Series B, extending onto technology, working together on the mission. Thank you very much. Coming up at Skunk Works, Lockheed Martin, California, tech billionaires Elon Musk and Palmer Luckey make it a say in the future of warfare. We will explain that, next. This is "Bloomberg Tech."
The Defense Department has tasked two of its biggest contractors to lead an effort to study the future of warfare and design weapons that American service members will need in the years ahead. The initiative is called Project Meridian and will be co-led by Palmer Luckey, Elon Musk, and former House Speaker Newt Gingrich. Wendy Benjaminson is with me. It was so interesting when the announcement was made. Explain the basic concept.
I will do my best. The Defense Secretary Pete Hegseth announced this as one of six initiatives he announced in his State of the Force speech that he gave on Wednesday, to an audience of hand-picked troops, then broadcast on the Pentagon website. What this is supposedly is a group of people led by those three that you mentioned, that will study over 120 days only — that's all they have for this — will study what warfare will look like in the future, what tools they need, what weapons they need, what vehicles they need. What makes this particularly interesting is that Elon Musk and Palmer Luckey are two of the biggest defense contractors in the world. They make a tremendous amount of money from the U.S. taxpayer via the Pentagon, and now they are in charge of deciding what tools the military will have. I can't imagine a world in which they don't profit from this.
You and I have discussed the president's proximity to CEOs, private industry. You noted the 120-day limit. What kind of access and authority are Musk and Luckey going to have?
They tweeted out photos of those three with Hegseth and the entire board meeting in the Pentagon. These are not open to the public. I don't know that we will be able to get transcripts. We don't know what they are going to come up with. They are clearly there, working with civilian military officials. We didn't see any military officials in the room. There were some members of Congress. The 120 days is a limit because that is when the special government employee status ends, and then they would have to pay these guys a salary. They have just a few months to come up with these new tools.
Bloomberg's Wendy Benjaminson out of D.C., thank you very much. Coming up, we are going to discuss Lockheed's technology strategy and some of the investments that they've been making. The conversation also about AI. Dr. Sarah Hiza, Senior Vice President of Technology and Strategic Innovation. Lockheed has been talking to Jensen Huang and NVIDIA, using GPUs for a long time. We will talk about that, too. This is "Bloomberg Tech."
We need to match the cost of the solution to the cost of the threat. It is well known that there are $4 million Patriot missiles to shoot down maybe a $50,000 drone. That is a bad exchange ratio. The other exchange ratio we have to consider here, with what we have today in the stockpiles, what is the trade-off between letting that Shahed drone hit a Marine barracks in Qatar, or to hit a factory, or an oil processing station in Saudi Arabia? The trade-off is not just the cost of the items, it is the cost of the damage.
Welcome back to "Bloomberg Tech." That was Lockheed's Jim Taiclet talking about one of the lessons learned from the U.S. war with Iran. He acknowledged the industry is seeking cheaper autonomous solutions. That is not historically an area that Lockheed has dominated, according to data compiled by Bloomberg. These are where the contracts are going, specifically in the drone segment in the last two years. But Lockheed is pushing hard on innovation, cost efficiency in terms of military options. This is about the nexus of AI and aerospace. With us now is Dr. Sarah Hiza, Senior Vice President of Technology and Strategic Innovation. Thank you for having us here at Skunk Works.
Absolutely, welcome. It's an honor to be here. No better place to talk about innovation and technology than Skunk Works, based on our mission. It's a center of excellence that we have.
I want to get straight to the idea of AI, what AI actually looks like within Lockheed, in terms of the program for next-generation platforms as well.
