Secretary of War Pete Hegseth recently delivered a powerful speech outlining an acquisition-reform agenda that could strengthen American power and deterrence for generations. The goal is straightforward: break the bureaucratic and regulatory asphyxiation that has constrained American industry and build a system that allows warfighters to draw on the best our innovation ecosystem can deliver, at wartime speed and scale.
That reform must include something the Pentagon has never fully embraced: America’s capital markets. No nation on earth possesses deeper reservoirs of private finance, nor a more capable innovation economy. And yet the United States continues to run its military weapon stocks like a failing East German grocery store. When allies come under attack, from Ukraine and Israel yesterday to Taiwan or Poland tomorrow, presidents face a choice they should never have to make: help a partner, or strip US forces of their own war stocks.
This scarcity is not the product of poverty; it is the product of a slow, inflexible, capital-starved system. In an era of continuous conflict and strategic competition, the president must have options that support both an America First and Peace Through Strength agenda.
Over the past decade, private investors have become one of the biggest engines of US defense innovation. Venture and growth funds have poured billions into drones, autonomy, sensors, manufacturing automation, hypersonic components, and ISR platforms. Startups like Anduril, Shield AI, and Saildrone have shown that private capital can move faster, take more risk, and deliver capability at a pace the government, with its hundreds of billions of dollars in weapon development funds cannot match.
What private capital has not been allowed to do is the simplest thing of all: help us build inventory. We encourage private investors to help invent weapons, but not to produce and stockpile them. That makes no sense. The same capital that is funding next-generation weapons can help fill the shelves with artillery, air defense, armored vehicles, drones, and missiles.
The SIPV Model: A New Arsenal For A New Era
A structured Surge Inventory Purchase Vehicle (SIPV) offers precisely that. The model is simple.
First, private capital would finance production of fully configured, fully tested military equipment under both SEC and Pentagon oversight using commercial contracts, not the defense acquisition system. Next, once the items are produced the War Department would define the readiness standards, configuration, and storage requirements. Finally, the Pentagon and approved allies would hold call options giving them the right to purchase systems at pre-set, non-gouging prices. Think of it as a 21st-century war bond, except one that produces tanks, drones, and missiles for future wars rather than present wars.
Consider an Armored Brigade Combat Team: 87 Abrams tanks, 152 Bradley Fighting Vehicles, 18 Paladins, plus munitions and sustainment kits costing roughly $3–4 billion to produce. Today, the US military would wait years for production to occur, all too late if war breaks out. An SIPV could finance and produce a “brigade in a box,” store it, and make it immediately available when needed.
This is not purely a theoretical model. National security itself already embraces private-capital readiness. The Maritime Security Program pays commercial shippers to maintain vessels for wartime activation. The Strategic Petroleum Reserve uses leased storage and exchange agreements.
A similar model could exist for defense, with investors owning stockpiles of standardized equipment and selling availability and readiness to the Pentagon or its allies.
This structure would benefit not just the US, but its allies and partners around the globe.
Billions in new foreign direct investment are flowing into the United States as allies seek to offset tariffs, secure supply chains, and deepen industrial ties. The administration could channel a portion of that capital into defense production using three rules.
First, nations that coinvest in an SIPV move to the front of the procurement line for that fund’s inventory. Next, trusted allies investing in SIPVs get a streamlined Foreign Military Sales (FMS) process, one in which they are automatically approved, so in wartime, they can just draw on the materials. (Admittedly, getting Congress on board with this would be a heavy lift and require legislation; an alternative could be that if a system is cleared by State, each future case no longer needs to be cleared, which would fast track the pre-Congressional process.) Lastly, the equipment must be manufactured in US facilities, supporting high-wage industrial jobs.
This creates a win-win-win: American workers build advanced systems, allies cofinance production, and the United States and its partners gain instant access to equipment at predictable prices.
Fund Economics And Risk Controls
Each SIPV could raise $4–8 billion, focusing on a specific class of equipment such as munitions, drones, armored vehicles, missile components, or spare-parts packages. The Pentagon would pay a small annual “readiness retainer” (around 2 percent) for storage and maintenance, performed under strict DoD oversight.
To attract capital, investors would receive 8–12 percent returns, which is a little higher than other critical-infrastructure funds given the political and obsolescence risks. This return would be generated by higher prices for the equipment. In essence there are two lines: buy the equipment on a several-year delay at a reduced price or buy it off the lot for a higher markup. If equipment begins to age out before being purchased, the Pentagon would execute a guaranteed swap of the older equipment for new equipment that it would have procured anyway.
It is fair and correct to say this kind of agreement simply won’t be for everyone in the finance world — and that’s ok. It is in essence creating a partnership between a number of limited private fund investors and foreign governments who either need longer term monetary rewards or are hedging strategic wartime risk. But a decade ago, nobody would have predicted the hundreds of billions flowing into defense startups, and so there is no reason to simply assume that no one will want to take part in this setup.
None of this cedes US government control. The Pentagon would have inspectors certify readiness. Storage depots could operate under military security standards. Ethical firewalls prevent lobbying around call-option decisions. Policy authority remains fully in government hands.
The next war will not wait for congressional reprogramming or three-year production lines. America needs strategic depth now, not in the 2030s. Private capital delivers that depth by eliminating production gaps between major contracts, creating immediately available inventories, absorbing financial risk now borne entirely by taxpayers, accelerating manufacturing learning curves, and enabling multi-year production without multi-year appropriations battles. Critically, this is not about privatizing war. It is about capitalizing readiness.
Private capital is already fueling the next generation of American military technology in ways we would never have imagined a decade ago. Extending that capital to production and stockpiling is the logical next step. With SIPVs, the US can refill its empty shelves, rebuild the industrial heartland, strengthen allied deterrence, and ensure the president never again faces the choice between helping an ally and hollowing out US forces.
It is time to make the United States once again the world’s reliable armorer, a nation whose industrial heart beats for freedom and whose shelves are never empty again.
Ret. Maj. Gen. John G. Ferrari is a senior nonresident fellow at AEI. He previously served as a director of program analysis and evaluation for the service.
