On April 23, the Defense Department and L3 Harris Technologies (NYSE: LHX) announced that they closed a $1 billion deal for the Department of Defense (DOD) investment in the company’s Missile Solutions business. The “strategic investment,” according to L3, will be used to “expand and modernize facilities, accelerate research and development, and increase production capacity for critical national security technologies.”
This is the most recent example of the Trump administration’s push to invest federal tax dollars directly in the private-sector defense industrial base (DIB). Earlier this month, the White House requested Congress allocate $92.4 billion in funds for the DIB in the FY27 President’s Budget Request (PBR). This unprecedented request for DIB investment represents a more than sixfold increase over last year’s $14 billion budget for private-sector investments and interventions.
This request signals that the Trump administration is willing to commit significant dollars to back up its rhetoric. For example, the president’s National Security Strategy, published late last year, stated that the country requires a “national mobilization to innovate powerful defenses at low cost, to produce the most capable and modern systems and munitions at scale, and to re-shore our defense industrial supply chains.” Additionally, the president’s 2026 National Defense Strategy listed the administration’s effort to “supercharge” the DIB as its fourth highest priority, and that the White House seeks to “bolster [the US’s] organic sustainment capabilities, grow non-traditional vendors, and partner with traditional DIB vendors…to restore our industrial capacity.”
Capstone believes the administration’s direct DIB-funding efforts reinforce the growth trends we have been highlighting across a wide range of investment opportunities in sectors as diverse as munitions, drones, critical minerals, and shipbuilding.
Specifically, the FY27 PBR seeks funds for three agencies, including $20.2 billion for the Office of Strategic Capital (OSC) — a 14 times increase from current funding; $30.4 billion for the Defense Production Act (DPA) Title III funding — a 25 times increase from 2026; and $41.8 billion for the Industrial Base Analysis and Sustainment (IBAS) program — nearly quadruple the current funding. Furthermore, the PBR highlights several specific priority areas for DPA funds. These include but are not limited to the hypersonics supply chain, critical chemicals supply chains, energy storage and batteries, castings and forgings, the space industrial base, and microelectronics. We believe that the OSC has similar priority areas.
This huge increase in funding for these programs reflects the Trump administration’s desire to significantly expand the Department of Defense’s (DOD) ability to directly intervene in the private sector to source and manufacture critical defense materials, technologies, and equipment in the US. The administration says this is necessary to protect US national security by reversing the trend of increased reliance on offshore and outsourced capabilities essential to the defense and broader industrial base. Reducing or eliminating reliance on China for key inputs, such as critical minerals, is paramount.
Capstone has also long believed that direct interventions to support the establishment of a US domestic critical minerals sector will expand into other strategic sectors, including, but not limited to, energy resilience. And now there are indications that this is materializing. For example, the administration recently issued five presidential determinations pursuant to Section 303 of the DPA to facilitate the expansion of US domestic capacity and production across energy transmission and distribution, natural gas, coal, oil, and other large-scale energy infrastructure. The president justified this on national security grounds, arguing that “America’s inadequate energy production, transportation, and infrastructure constitute an unusual and extraordinary threat to the Nation’s economy, national security, and foreign policy.”
Moreover, given the administration’s emphasis on revitalizing the DIB and the bipartisan nature of efforts to make US national security supply chains and the sourcing of critical defense materials independent of near-peer competitors, we presume that at least some of the Trump Administration’s proposed spending on national security investments will be included in a regular Congressional appropriations bill, should a reconciliation effort fail.
Capstone’s investor and corporate clients are eagerly watching the increased use of these investment authorities and thinking creatively about how their portfolio companies or future platforms could benefit from these resources. For example, pursuing government funding to significantly increase manufacturing capacity or other capital-intensive activities in critical sectors would support both US interests and the corporate bottom line.
This is a space where Capstone remains heavily engaged, and we will follow it closely throughout the annual budget appropriations cycle and beyond.
Read more from Capstone’s National Security Team:
What to Expect from the US-South Korea Investment Deal
The Growing Munitions Supply Chains Bottleneck
Regulatory Changes to Foster US Drone Supply Chains
