The proposed U.S. defense budget for 2025 is $1 trillion — equivalent to Spain’s GDP. The first companies to bid for (and win) public defense contracts were Palantir and Anduril, Silicon Valley tech firms whose names have echoes of The Lord of the Rings. When fighter jets patrol Washington’s airspace following Trump-ordered strikes on Iran’s nuclear facilities, it’s a timely reminder that wars today are more high-tech than ever.
The U.S. tech sector has always been deeply intertwined with defense. During the campaign, Trump sowed doubts about whether this tradition would continue, given his anti-war rhetoric and his criticisms of both Bush and Obama over the Iraq and Afghanistan wars. The U.S. withdrawal from Afghanistan — handled by Biden — was as ignominious as it was poorly managed. Far worse than the fall of Saigon in 1975, despite Biden’s promises to the contrary.
Leon Panetta, Obama’s Secretary of Defense, defended Trump’s decision to attack Iran in an interview on CNN with Wolf Blitzer: “The U.S. didn’t have any alternative.” The tech sector doesn’t see things in black and white; it looks for opportunity in the gray area, the natural habitat of Silicon Valley since Trump became president.
The heads of major tech companies attended Trump’s inauguration, hoping to reap the benefits of a closer relationship with a president they had rejected in 2016 and 2020. Not in 2024-25, though, with Elon Musk (Tesla, Neuralink, X, xAI, SpaceX) a leading figure in Trump’s cabinet. Mark Zuckerberg (Meta) declared himself more Trumpist than Trump. And Jeff Bezos (Amazon), Sundar Pichai (Alphabet), Satya Nadella (Microsoft), Tim Cook (Apple), Jensen Huang (Nvidia), Lisa Su (AMD), and many others accompanied Trump on his trip to the Middle East (UAE, Saudi Arabia, Qatar), where they signed $200 billion worth of AI contracts — data centers, infrastructure, and chips.
On January 23, Stargate Venture announced its first data center in Texas — a partnership between Oracle (Larry Ellison), SoftBank (Masayoshi Son), and OpenAI (Sam Altman). The day after Trump’s inauguration, they pledged — along with Nividia, Apple and other firms — to invest half a trillion dollars in AI infrastructure.
These promised investments allowed Trump to boast about the MAGA victory and the return of manufacturing to the U.S. Then came Trump’s first bomb: tariffs, in April. The second bomb came in the early hours of Sunday, June 22: 16 strikes on three Iranian nuclear sites (Natanz, Fordow, and Isfahan). The tech sector weathered the first well and is fairly optimistic about the second.
By the end of the first half of the year, U.S. tech companies reported stellar earnings: 90% of the S&P 500 and Nasdaq firms increased profits by an average of 13%. The Magnificent 7 fared even better: Microsoft, Amazon, Alphabet (Google), Nvidia, Meta, and Apple all broke records. Tesla, however — while Elon Musk was missing in action, cutting costs in government contracts — experienced the worst half-year in its history. The end of EV subsidies was the last straw in the Trump-Musk relationship. The two have gone from allies of convenience to brief enemies, and are now estranged. Musk is returning to focus on his businesses.
Despite tariffs, uncertainty, and Trump’s policy flip-flops, Microsoft, Amazon, and Alphabet posted major gains, driven by two revenue streams: cloud computing (Azure, AWS, Google Cloud) and their legacy businesses — software, retail e-commerce, and online advertising. Similarly, Meta and Google-YouTube benefited from advertising on social platforms, and Apple from iPhone sales. Market perceptions diverged not because analyst expectations weren’t met — they were exceeded — but because of varying future outlooks.
Microsoft, Alphabet, and Meta raised their forecasts for the year and announced further AI infrastructure investments: on average, each firm will invest $75 billion this year. Their stocks rose. In contrast, Andy Jassy (Amazon) and Tim Cook (Apple) hesitated to make forecasts, citing the usual factors: “uncertainty, volatility, supply chains, tariffs, China,” etc. Despite strong Q1 and Q2 results, this lack of forward guidance weighed on their stock performance. Nvidia, the last to report, posted dazzling results and such bullish forecasts that it lifted the entire tech sector.
Trump has opened the Pentagon’s purse to Silicon Valley. Cisco and Salesforce have secured lucrative government contracts. Biden’s AI restrictions have been lifted, and cryptocurrencies, NFTs, and other speculative ventures — openly benefiting the president’s family — now face no regulatory barriers.
Secretary of State Marco Rubio has not hidden his discontent with the Iran strike, which leaves no room for diplomacy. Secretary of Defense Pete Hegseth doesn’t think too hard — he just repeats the president’s talking points. Vice President J.D. Vance, formerly of Palantir, simply smiles — perhaps recalling the words of film director and Vietnam vet Oliver Stone: “Wars can be very profitable for certain companies.”
