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Palantir and Anduril, two of the largest U.S. defense technology companies, are currently negotiating with about a dozen competitors to form a consortium that will jointly bid for U.S. government contracts to disrupt the country’s oligopoly of “prime contractors.”

The consortium plans to announce in January that it has reached agreements with a number of technology companies. Companies negotiating to join include Elon Musk’s SpaceX, ChatGPT maker OpenAI, autonomous ship maker Saronic and artificial intelligence data group Scale AI, according to several people familiar with the matter.

“We are working together to create a new generation of defense companies,” said a person involved in the group’s development.

The move comes as technology companies seek to grab a larger share of the U.S. government’s massive $850 billion defense budget from traditional prime contractors such as Lockheed Martin, Raytheon and Boeing.

The consortium will combine the strength of some of Silicon Valley’s most valuable companies and use their products to give the U.S. government a more efficient way to deliver cutting-edge defense and weapons capabilities, according to a second person involved.

Defense technology startups have received record amounts of funding this year as investors bet they will be among the winners of increased federal spending on national security, immigration and space exploration under the new administration of Donald Trump.

Wars in Ukraine and the Middle East, as well as geopolitical tensions between the US and China, have increased the government’s reliance on technology companies developing advanced AI products that can be used for military purposes, encouraging investors in the sector.

Palantir’s stock price has risen 300 percent in the past year, giving the company a market capitalization of $169 billion – more than Lockheed Martin. The data intelligence group was co-founded by technology investor Peter Thiel, who also provided initial backing for Anduril, which launched in 2017 and was valued at $14 billion that year.

Meanwhile, SpaceX was valued at $350 billion this month, making it the world’s largest private startup, and OpenAI has risen to a value of $157 billion since its founding in 2015.

Each of these companies has sought to secure a share of the government’s defense budget. While SpaceX and Palantir have won major public contracts for two decades, some are even more recent in public procurement. OpenAI updated its terms of service this year to no longer explicitly prohibit the use of its AI tools for military purposes.

U.S. defense procurement has long been criticized as slow and anticompetitive, favoring a small number of decades-old powerhouses such as Lockheed Martin, Raytheon and Boeing. These giant conglomerates typically produce ships, tanks, and aircraft that are costly and take years to design and manufacture.

Silicon Valley’s burgeoning defense industry has prioritized producing smaller, cheaper, autonomous weapons that they claim would better protect the U.S. and its allies in a modern conflict.

A person involved in the consortium’s development described it as an “industry alignment” to “execute the Defense Department’s technical priorities” and “solve critical software capability issues.”

Some collaborations between the technology groups expected to be part of the consortium have already been agreed and integration work will begin immediately.

Palantir’s “AI platform,” which enables cloud-based data processing, was integrated into Anduril’s autonomous software “Lattice” this month to provide AI for national security purposes.

Similarly, Anduril combined its anti-drone defense systems with OpenAI’s advanced AI models to collaborate on U.S. government contracts related to “aerial threats.”

A joint statement from Anduril and OpenAI on this partnership said it “aims to ensure that the U.S. Department of Defense and the intelligence community have access to the most advanced, effective and secure AI-driven technologies available worldwide.”

Anduril, OpenAI and Scale AI declined to comment on the consortium’s development. Palantir, SpaceX and Saronic did not respond to requests for comment.