War Secretary Pete Hegseth's effort to overhaul the Pentagon's weapons-buying system by directing more money to defense-tech startups is reshaping military procurement, but the initiative is facing growing scrutiny on Capitol Hill.

According to The Wall Street Journal, Hegseth has spent more than a year rewriting long-standing acquisition rules to speed purchases of drones, artificial intelligence, and other emerging technologies while cutting through bureaucracy that has long favored the nation's largest defense contractors.

The changes have sparked a wave of venture capital investment and drawn thousands of startups into the defense sector, even though established defense companies continue to receive the overwhelming majority of Pentagon contract dollars.

Pentagon spending on the 15 highest-valued defense-tech startups tripled from 2022 levels in the last fiscal year, but those firms still accounted for less than 1% of all defense contracting dollars, according to the Ronald Reagan Presidential Foundation & Institute's National Security Innovation Base Report Card.

Even so, startup executives believe the door is beginning to open.

"We've got a shot to disrupt this thing," Philong Duong, chief executive officer of NODA AI, told the Journal. The startup sells software for autonomous weapons under a Pentagon contract.

The Center for Strategic and International Studies estimates roughly 10,000 new defense companies have entered the market over the past two years.

As the U.S. military adapts lessons from the war in Ukraine and prepares for the possibility of conflict with China, spending on AI-powered systems, drones, and autonomous weapons has accelerated.

That shift comes as battlefield technology is advancing faster than the military's purchasing process can move, Paige Craig, a defense-tech investor at Outlander VC, told the Journal.

Craig described the trend as the "PC era of war," where "it's affordable and everyone is going to have fairly equal access to the fundamental means of warfare."

Hegseth has reportedly responded by streamlining procurement, expanding purchasing authority for lower-ranking officers, easing some contracting requirements, and creating new opportunities for startups to compete for Pentagon business.

"We've been waging a war of attrition against the Pentagon bureaucracy to open up the aperture and make sure competition, speed, innovation and commercial options all have a seat at the table," Hegseth told the Journal.

The strategy has fueled record investment. According to PitchBook, defense and aerospace startups attracted $16.8 billion in venture funding in the first half of the year alone, already surpassing previous annual highs.

Still, some of the industry's biggest backers are pointing to a bubble and caution that enthusiasm may be getting ahead of reality.

"I am very uncomfortable. I am not enjoying this moment at all," Anduril co-founder Trae Stephens said on a recent episode of the podcast "Uncapped." "Prices are untethered from reality."

Congress is now weighing Hegseth's proposed $1.5 trillion defense budget while examining the Pentagon's increasing investments in venture-backed firms.

The outcome of that debate could determine how much momentum Hegseth's procurement overhaul carries into the next phase of military modernization.