Israel is accelerating its transition to a defense technology-driven nation model.
With nearly $3 billion in investment in the first half of 2026, Israel is prioritizing the development of AI, electronic warfare, and automation systems based on real-world combat experience.
Israel is witnessing a boom in the defense technology (Defense-Tech) sector, with investment capital growing dramatically. According to data from the Haifa Defense-Tech Startup and Investor Forum, in the first six months of 2026 alone, startups partnering with the Israeli Ministry of Defense raised nearly $3 billion, three times the total capital raised in all of 2025.
Shifting the strategy towards Defense-Tech.
The defense technology and dual-use technology sectors now account for nearly 30% of Israel's total $8.4 billion in private investment in high-tech industries in the first half of 2026. This shift marks a strategic transition for Israel from a cybersecurity-focused nation to a "defense technology nation" model.
Currently, around 800 startups are directly fulfilling procurement orders from the Israeli Ministry of Defense. Experts recommend that these startups focus on developing independent technology components that can be flexibly integrated into the platforms of large corporations such as Lockheed Martin, Raytheon, or domestic companies like IAI, Elbit Systems, and Rafael, rather than attempting to manufacture complete weapon systems.
Prioritize software technology and artificial intelligence.
Experiences from conflicts in Ukraine, the Gulf, Lebanon, and Gaza have reshaped investment priorities. Key areas now include radio spectrum control, GPS jamming, and drone (UAV) disabling solutions. In particular, there is a strong flow of capital into artificial intelligence (AI) to support real-time automated decision-making, military supply chain management, and system failure prediction.
The current trend is shifting from traditional weapon platforms to software-based systems. Products that are currently highly valued include:
- Operating systems designed for battlefield and military cloud computing with encryption.
- Automated control software for UAVs and robots.
- AI solutions support command and control in combat operations.
Collaboration between startups and large corporations
The combination of startup flexibility and the resources of established defense corporations like Rafael is helping to bridge the gap from research to field deployment. Government agencies such as the Israel Innovation Authority and the Defence Research and Development Agency (DDR&D) are also proactively removing barriers and supporting businesses instead of just performing administrative roles.
Positive impact on the economy and infrastructure.
The boom in defense technology has boosted the number of workers in Israel's high-tech sector to 424,000, a 6.2% increase from the previous period. Demand for workspace from defense businesses also increased by 32% in the first half of 2026, with over 140,000 m² of new office space leased.
Although 80% of businesses are currently concentrated in the central region, the City of Haifa is striving to build a new technology hub in the north to distribute resources more evenly and enhance the resilience of the national security system. HiCenter Ventures plans to continue investing in around 10 defense technology startups in 2026 to consolidate this growth momentum.
