March 26 (Reuters) - Shield AI is raising $2 billion in

a new funding round at a $12.7 billion valuation, as the defense

technology startup looks to expand its artificial

intelligence-powered software amid growing use of autonomous

tools during conflicts.

The startup said on Thursday the Series G round was led by

Advent International and co-led by JPMorganChase's Strategic

Investment Group, with participation from existing investors

including Snowpoint Ventures and Riot Ventures.

Shield AI said Blackstone-managed funds are investing $500

million in preferred equity as part of the financing, while also

committing an additional $250 million delayed draw facility that

could bring its total investment to $750 million.

The use of autonomous technologies in the U.S. and Israel's

coordinated strikes against Iran and Russia's invasion of

Ukraine has boosted demand for tools made by companies that

specialize in autonomous flight software.

Shield AI's Hivemind software allows drones and aircraft to

operate in GPS-denied environments and has been tested on

several platforms, including the F-16 fighter ‌jets and the U.S.

Air Force's uncrewed weapon system called Collaborative Combat

Aircraft.

Shield AI plans to use a portion of the funds to buy

simulation software maker Aechelon Technology from private

equity firm Sagewind Capital, it said, without disclosing

financial terms of the deal.

"The acquisition of Aechelon will accelerate the work we are

doing with Hivemind, particularly in simulation like the

Department of War's JSE (Joint Simulation Environment)," Shield

AI CEO Gary Steele said in a statement.

The JSE is a high-fidelity virtual combat range used by the

U.S. military to test aircraft, autonomous systems and tactics

against realistic battlefield threats.