🔷 AI Battle

In That Number

25%

B-21 Raider production capacity is expanding by 25%, utilizing $4.5 billion in existing funding to accelerate the stealth bomber's delivery timeline. The exact production rate is classified but believed to be about 7 per year.

Assuming that, it’s upwards of 2 more bombers per year (6-to-7.5 or 8-to-10).

On the Radar

AI Impasse. The US government went nuclear on Anthropic over the AI company’s refusal to allow unrestricted military use of its frontier Claude LLM models, especially for domestic surveillance or fully autonomous weapons. Anthropic stuck to their ethos, and as a result, the US is banning them from all federal government agency work (terminating their $200m contract) and also designates the company a national security risk. Then OpenAI (ChatGPT) announced they made a deal with the Pentagon to let ’er rip tater chip, without those guardrails. Anthropic has the best and most integrated AI the US government is using for classified purposes, so they can’t quit it cold turkey even if they want—it will take months to replace.

• The Merge’s Take: Too much to unpack here, but the whole thing is full of contradictions. The Pentagon wants to remove guardrails, but promises that they won’t use the AI in that way? How is Anthropic both vital to national security and concurrently a threat to national security? The weird political spin this took on in the public realm is unlikely to age well. Setting conjecture aside, it’s worth the time to read Anthropic’s statement highlighting the 2 issues and contradictory positions the Pentagon took, then watch the video of CEO Dario Amodei explaining the nuances and implications of the 4th amendment (it’s a perspective most people have not given thought to). What plays out in the coming weeks is likely to influence policy and positions in this entire segment.

Unmanned Engines. The Air Force jump-started the autonomous aircraft propulsion pipeline by awarding prototype design contracts to 4 teams: Beehive Industries, Honeywell, Pratt & Whitney, and a GE/Kratos team.

• The Merge’s Take: This effort appears to target the 1,500-2,800lb class, which is precisely where the Williams FJ44 engine sits (the engine's current CCA platforms are presumably using), though this effort appears to focus on higher G maneuvering and lower sustainment. Keep an eye on Beehive, a start-up whose strategy is to target the entire 100-5,000lb thrust class via 3D-printing. They already have contracts with the Air Force to develop a 200-lb (Oct 2024) and 1,000-lb (Mar 2025) thrust-class prototypes.

$152B Sprint. The Pentagon revealed its plan to spend the $152B from last year’s reconciliation bill. While the funds are good until 2029, the effort is to front-load spending in 2026 to the maximum extent possible. The plan also includes another $1B in Defense Production Act funding.

•  The Merge’s Take: The decision to front-load the spend plan is strategic as it clears some deck chairs for a bigger FY27 defense budget, though with so much happening so fast, some time is needed to assess where the impacts and gaps are. Recall it took 8 months from the money's signing into law for the spending plan to be finalized, and it will take many months to get the contracts in place to actually put it to use.

Ringleader: The Air Force unveiled Ringleader, a new series of exercises designed to operationalize the DAF Battle Network, the department’s primary contribution to CJADC2. Ringleader will focus on practicing fusing massive volumes of data from air, space, ground, and commercial sensors—in real time—to close kill chains.

• The Merge’s Take: This is long overdue. For the billions spent on developing the software and hardware to do this, only pennies have been spent on figuring out how to make it all work together. Battle management at scale with a dynamic kill-web is going to be hard, and we suspect there will be some massive setbacks lessons learned in the coming year.

Winter War. Severe winter weather has grounded Ukraine’s interceptor drone fleet, with sub-zero temperatures, snow/freezing rain, and high headwinds causing battery drain and iced sensors.

• The Merge’s Take: This has happened in the last 4 winters at war, but it’s an annual reminder that expensive systems are generally expensive for a reason, and low-cost FPVs have trade-offs that become apparent in poor meteorological conditions. The time is about right to see a booming drone component market for winter-resilient components.

TRIVIA

On March 1st, 1912, Army Captain Albert Berry made history by performing the first-ever ___

A) parachute from an airplane
B) aerial machine gun kill
C) air-dropped supply bundle

They Said It

“‘Deliver a plan’ does not mean we’re going to put it in the budget. We’ll deliver a plan of what it takes to do, and then we’ll have a discussion.” 

— Troy Meink, Secretary of the Air Force, signaling that the service may still attempt to cut the E-7 Wedgetail in future budget cycles despite Congressional pressure

Knowledge Bombs

• Chariot raised a $34M Series A to scale battlefield power systems

• SNC & Specter Aerospace are collaborating on supersonic air-launched effects

• Swarm Aero opened an 80,000 sq ft plant in Arkansas to mass-produce drones

• Swarmer set terms for a $15M IPO to fund autonomous drone software

• Aalyria raised a $100M Series B funding round at a $1.3B valuation

• DIU's commercial hypersonic testbed’s first launch is imminent (Rocket Lab launcher + Hypersonix’s scramjet-powered vehicle)

• Titan Dynamics joined the DoW’s Drone Dominance Program for Gauntlet I testing

• SpaceX & xAI joined a $100M competition for voice-controlled drone swarms

• NODA AI raised a $25M Series A for cross-domain autonomy orchestration

• Ursa Major introduced HAVOC, a hypersonic missile designed for mass production

• Lockheed Martin flight-tested an F-35 with AI-enabled combat ID

• AST SpaceMobile USA won a $30M SDA contract for its space-based direct-to-device service (their first prime contract)

• Anduril flew its YFQ-44A CCA and swapped 2 different mission autonomy stacks mid-flight (Shield AI’s Hivemind & Anduril’s Lattice)

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ANSWER
A) equipped with ballz of steel, Captain Albert Berry performed the first-ever parachute jump from an airplane on March 1st, 1912. Nearly 30 years later, the Army created the first parachute infantry platoon.