This Week in Dual-Use

NEWS

GCHQ announces plans for AI cyber shield

I was invited to Bletchley Park last Wednesday for GCHQ’s inaugural annual lecture given by its director, Anne Keast-Butler. The small audience was a mix of press, startups, and a smattering of investors.

Keast-Butler warned that the UK is at a ‘moment of consequence’ in the face of increasingly brazen behaviour from adversaries, with Russia scaling up its daily hybrid activity against the UK and Europe.

I think that could probably have been said four years ago. I remember at that time doing an analysis of Russia’s grey-zone operations and creating a market map of companies developing grey-zone technologies. My conclusion was that we were at a moment of consequence. I didn’t have a newsletter back then, so I kept it to myself.

The big announcement of the day was GCHQ’s plan for an AI cyber shield. At the time that felt like a buzzwordy catch-all for better cyber security. In fact, it heralds the incorporation of frontier AI into GCHQ’s algorithms for analysing intelligence data. The system would use AI agents to detect and flag threats.

That is quite a departure for GCHQ. The output of LLMs is probabilistic, not deterministic. That makes them difficult to audit - not a desirable trait in intelligence work. Presumably GCHQ is solving for that.

The obvious next question is which provider to choose. The best AI labs are American. Meanwhile Europe has Mistral and Canada has Cohere. It will be interesting to see which route GCHQ decides to take. Perhaps it can also expedite the five year timeline it is planning.

China covertly trained Russian solders to fight in Ukraine

China's armed forces secretly trained about 200 Russian military personnel in China late last year. The training sessions apparently focused on the use of drones.

I have been developing a thesis recently about the rise of a new Axis of Evil. Many readers will remember the original Axis of Evil (Iran, Iraq, North Korea) which featured in a speech by George W. Bush back in 2002.

I have been wondering whether the defining feature of the new axis - China, Russia, Iran, North Korea - is defence tech. The propagation of novel defence technologies and the (relative) unity of the West has led to exchange of knowledge between those countries.

Russia apparently offered Iran a ‘package’ of drones to counter a US invasion. North Korean artillery shells are landing in Ukrainian fields. And now Chinese instructors are teaching Russian soldiers how to fly drones, on Chinese soil.

Perhaps this was the inevitable response to the West’s export control regime: the construction of a parallel system which routes around it.

Hezbollah uses FPV drones

In more defence tech proliferation, Hezbollah is becoming increasingly adept at targeting Israeli troops with fibre-optic FPV drones.

The technology did not originate with Hezbollah. Fibre-optic FPVs were first deployed by Russians in Ukraine to defeat Ukrainian electronic warfare (EW) capabilities. Since then the technology has proliferated. Hezbollah is now fielding these fibre-optic drones, but there are also reports of Colombian narco gangs using them against government forces.

What’s interesting here is the domestic production. The fall of Assad severed Hezbollah's Iranian resupply routes through Syria. So Hezbollah responded with indigenisation. True sovereign capability.

I suspect this is a dynamic that Western planners have been slow to incorporate into their threat models: sanctions and interdiction operations designed to constrain an adversary's capability can, under certain conditions, accelerate the development of domestic production. Hezbollah now manufactures drones that no external actor can embargo, because the supply chain begins and ends in Lebanon.

Israel's response is characteristically rapid and well-resourced. Netanyahu has declared no budget constraint on counter-drone development. The IDF is establishing a domestic suicide drone factory with a target output of tens of thousands of units per month.

But urgency does not resolve the specific technical problem. EW, Iron Dome, and existing radar architectures were all designed against a different threat model. The fibre-optic FPV sits in the gap between them.

FUNDRAISING

DEFENCE

Mach Industries, an American builder of hypersonic glide vehicles, raised $300M at a $1.8B valuation.

Picogrid, an American company developing a hardware and software integration platform, raised a $45M Series A led by Bessemer Venture Partners.

Layup Parts, an American composites company founded by a former Anduril engineer, raised a $42M Series A led by Marlinspike.

SPACE

Impulse Space, an American builder of spacecraft and propulsion systems to manoeuvre satellites in orbit, raised a $500M Series D co-led by 137 Ventures and Banner VC.

EOS X Space, a Spanish balloon-tourism startup, raised a $140M Series D.

Observable Space, an American developer of laser communications ground stations, ground-based sensing systems, and in-space optical payloads, raised a $90M round.

Zenk Space, a Chinese space launch company, raised a $26M round led by Wenzhou Bay Investment Group.

QUANTUM

OQC, a British developer of superconducting quantum computers, raised a $350M Series C led by Bullhound Capital. It is the largest ever funding round for a European quantum computing company.

Casimir, a French developer of quantum vacuum energy, raised a $12M seed round led by Scout Ventures.

Quantum Bridge Technologies, an American quantum-safe cybersecurity startup, raised an $8M Series A led by Primo Capital.

FrostByte, a Dutch developer of quantum cryogenic CMOS electronics, raised $1.5M in pre-seed funding led by UNIIQ.

GOING PUBLIC

Anthropic, the American AI lab behind Claude, has confidentially filed for an IPO. It was recently valued at $1T.