Southern California’s defense industry is experiencing an unmistakable resurgence, with military contracting dollars flooding into the region at a pace not seen in decades.
According to a joint analysis by CalMatters and The Markup, the total value of defense contracts awarded to companies in Los Angeles County has more than doubled over the past decade, even after accounting for inflation. That growth far outpaces the overall federal defense budget, which climbed about 19% in the same timeframe.
Last year alone, LA County businesses collected roughly $15 billion in defense contracts. While established giants like Boeing — headquartered elsewhere — still capture a large share of that spending, a new generation of local startups is increasingly cutting into the market. These companies specialize in emerging technologies such as low-cost missile systems, drones, surveillance satellites and artificial intelligence tools built for military use.
The momentum has been striking. In 2025, ten Los Angeles-area startups reached “unicorn” status — meaning investors valued them at more than $1 billion — according to the Los Angeles Business Journal. Most of those companies work in aerospace or defense.
The CalMatters and Markup analysis found that drone- and space-focused firms accounted for 14 of California’s top 100 defense contracts in 2015. By 2025, that number had grown to 21, with their overall share of contract dollars rising from 13% to 18%. Depending on how the data is measured — such as by contractor headquarters versus project location — the true increase could be even larger.
Much of this growth traces back to a wave of venture capital that has poured into aerospace and defense technology since 2008, according to a report from the Aerospace Corporation, a federally funded research nonprofit. That private investment has helped fuel today’s surge in government contracting.
But the boom is also creating friction in Washington.
The ongoing war involving Iran — which has drained American munitions stockpiles — is expected to push demand even higher. President Trump’s latest budget proposal calls for a record $1.5 trillion in military spending. At the same time, the Pentagon has begun awarding early contracts for the “Golden Dome,” an ambitious missile-defense shield that could eventually cost hundreds of billions of dollars. Many of the companies selected for that project are based in or connected to Southern California.
“You saw this huge rise in capital, and now you’re seeing much, much bigger government budgets for space,” said Sam Wilson, a researcher with the Aerospace Corporation.
That convergence of private investment and public military spending has unsettled some advocacy groups, who warn of a slide toward privatized warfare and the possibility of a new space arms race. Even some congressional Democrats have begun voicing objections to the scale of spending — a notable shift, since defense budgets have traditionally enjoyed bipartisan support.
“It has tended to be a bipartisan, equal effort to increase the [defense] budget,” said Lindsay Koshgarian, director of the National Priorities Project, which monitors military spending nationwide. “I think we are maybe seeing the limits of that now.”
Still, some of the biggest beneficiaries of the spending boom are found in deep-blue districts that voted overwhelmingly against Trump.
California’s 36th Congressional District, which includes the defense-tech hub of El Segundo, is represented by Democrat Ted Lieu, who won reelection in 2024 with nearly 70% of the vote. Defense contracts flowing into that district grew by more than $3.3 billion between 2015 and 2025.
Representative Maxine Waters’ 43rd District has seen similarly dramatic growth — despite Waters herself once backing legislation to abolish the Space Force altogether. Defense obligations in her district have increased by more than $1.6 billion, or over 500%, in the past decade. Waters’ office did not respond to requests for comment.
Seamus Daniels, a defense budget expert at the Center for Strategic and International Studies, said the proposed $1.5 trillion defense budget for fiscal year 2027 would exceed even the peak levels of spending during World War II. He noted that the administration is pursuing this expansion while simultaneously proposing cuts to non-defense priorities such as healthcare — a combination that has made the budget especially contentious among Democrats.
Koshgarian said many Democratic lawmakers have historically supported increased military spending, particularly when it benefits their districts. But she believes attitudes may be shifting as the scale of proposed spending grows.
“That tension is definitely real, even in left districts,” she said. “But I think we’re reaching a level of extremity now that that might be starting to flip.”
A Comeback Decades in the Making
California’s dominance in defense technology didn’t happen overnight. The Silicon Valley Defense Group, which tracks emerging national security firms, found that of the top 100 technology-driven defense companies nationwide in 2026, 47 were headquartered in California — more than five times the number based in Colorado, the next closest state.
That wasn’t always the case. California was a manufacturing powerhouse during World War II and later became home to major aerospace firms such as Lockheed, Northrop and Convair during the Cold War. But the end of the Soviet Union triggered deep cuts to defense budgets in the 1990s, and industry consolidation eventually pushed corporate headquarters out of state — Lockheed Martin relocated to Maryland, Northrop Grumman to Virginia. Aerospace sales, which peaked in 1987, fell by nearly a third within six years, according to the RAND Corporation.
The turning point came in 1995, when San Diego-based General Atomics tested its Predator drone above the California desert. Armed with Hellfire missiles, the aircraft would go on to define modern warfare during the War on Terror.
Since then, a new wave of venture capital — combined with shifting government priorities — has revived the state’s defense sector. Stock values for aerospace and defense firms surged shortly after Trump’s first inauguration in 2017, and government contracts have since transformed companies like Costa Mesa-based Anduril into multibillion-dollar operations.
Where Venture Capital Meets Military Spending
Southern California’s advantage is bolstered by the presence of SpaceWERX, the Space Force’s innovation and seed-funding arm, headquartered in El Segundo. The office frequently funds nearby companies, reinforcing the coastal city’s growing reputation as a defense-tech hotspot.
During a recent visit promoting the “Arsenal of Freedom” initiative — a push to dramatically scale up munitions production — Defense Secretary Pete Hegseth toured Rocket Lab’s facility in Long Beach and praised the company’s role in expanding U.S. space capabilities.
“This company, you right here, are front and center, as part of ensuring that we build an arsenal of freedom that America needs,” Hegseth told employees.
The pipeline from private investment to public contracts typically starts with SpaceWERX, which awards early seed funding to promising startups. Since 2021, the agency has issued 380 contracts worth more than $461 million to California companies — more than any other state, according to SpaceWERX spokesperson Matthew Clouse.
Once a company receives SpaceWERX backing, private investors often follow, viewing government funding as a signal of future demand, said Arthur Grijalva, the agency’s director. That dynamic has funneled billions of dollars into California-based defense startups in recent years.
El Segundo Mayor Chris Pimentel said local leaders have worked for years to attract that investment, even traveling to meet with venture capital firms during the economic downturn of the early pandemic.
“It really paid off with large dividends,” Pimentel said. “We started showing up and being in the room with some of the larger venture funds and saying, ‘we can make these things happen down here. We can build stuff.’”
He added that the effort has been driven by a shared belief in the region’s aerospace legacy, regardless of political affiliation. “This is where the future has been made historically,” he said.
Some companies built on these partnerships have grown into industry titans. Elon Musk’s SpaceX, founded in the Los Angeles area, completed the largest initial public offering in history this past June.
Smaller firms are expanding rapidly as well. True Anomaly, a space defense company founded in Colorado in 2022, now operates its largest office in Long Beach. “When you’re building this type of company, it’s frankly somewhat of a necessity to have a footprint here,” said Chief Financial Officer Mark Seidel.
The company has worked on Space Force missions and was recently selected as a contractor for the Golden Dome program. A $650 million funding round in April pushed its valuation past $2 billion.
Even as the defense sector brings jobs and investment to the region, critics warn of the risks tied to unchecked growth.
“We very much risk getting into a space arms race, where China invests more, so we invest more, so China invests more and we invest more,” Koshgarian said. “Where does it stop?”
Original source: CalMatters
