National AI Program Stalls; Stealthy Defense Startups; AI Physiotherapy
Packed Weekend Edition includes updates on Israel's new supercomputer, motion sensing startup Sency wins IDF physiotherapy tender, and a star-studded defense startup’s silent un-stealthing
Welcome to Israel Tech Insider, a newsletter making sense of Israeli tech. It’s written by me, Amir Mizroch, and made possible by paid subscribers. Become one of them.
Today’s Agenda:
Updates on Israel’s AI National AI Program, new Supercomputer, and the IDF’s plan to move tech units to the desert
Motion sensing startup Sency wins IDF physical rehab digital tender; 16,000 wounded soldiers need help
A new $6B Cybersecurity Rocket Ship
Star-Studded Defense Startup’s Silent Stealth non-Story
New startup Nekuda launched to shift e-Commerce to a(gent)Commerce
Microsoft is treading a tech tightrope over Israel and Gaza
The usual People Moves and Opportunities
4 Years In, Israel’s AI Grand Plan Is Still Mostly Paper
TL;DR: In 2021, Israel launched a five-year, NIS 5.26B (~$1.48B) National AI Program. Four years later, just NIS 1B ($281M) has been spent. The result? No national compute cluster, stalled pilots, and zero funded “moonshots.” The world is building. Israel is still drafting.
When Israel rolled out its National Program for Artificial Intelligence in 2021, it promised to put the country at the cutting edge of AI. Five bold objectives, three high-impact “moonshots,” and nearly NIS 5.3 billion in public investment.
As of April 2025, only one-fifth of the budget has been released, and the majority of its goals remain unbuilt, unfunded—or both.
Here’s what the plan aimed to do. And where it actually stands.
1. AI Infrastructures
Israel committed to building high-performance computing (HPC) clusters, data rooms, and the underlying hardware for training large-scale AI models in Hebrew, Arabic, and scientific domains.
What’s happened: A pilot HPC lab opened in 2024 to test server designs and cooling rigs, but no national GPU cluster is operational. No public specs, access guidelines, or usage metrics. A second scientific computation center for energy, biology, and materials is expected in 2025—but remains vaporware for now.
Meanwhile, training a competitive AI model today requires thousands of GPUs and millions in compute resources. Israel's startups are getting priced out of global cloud platforms—and the subsidized alternative doesn’t yet exist.
2. Accelerating High-Tech Adoption
The plan called for regulatory sandboxes across finance, healthcare, and transport—controlled environments where rules are relaxed to test AI innovations. It also pledged 500 grants to help small manufacturers digitize.
What’s happened: Only two sandboxes have been approved. The SME voucher program is still a bullet point with no rollout timeline. Nine public-sector AI pilots have been greenlit—from permit automation in Tel Aviv to predictive water utility maintenance—but none has released success metrics or scaling plans.
3. Government AI Integration
This objective aimed to embed AI across ministries, with new public services, procurement policies, and civil servant training programs.
What’s happened: A cross-government knowledge center meets quarterly and is drafting deepfake mitigation guidelines. AI pilot grants totaling NIS 25M have supported 18 projects. Training for 2,000 government workers begins this year, with pilots under way in four ministries.
Progress is real—but modest, scattered, and largely disconnected from national infrastructure.
4. International Leadership
The vision: secure Israel’s place as a global AI player through bilateral agreements, standard-setting, and R&D cooperation.
What’s happened: Israel signed five bilateral AI deals (with the U.S., EU, Japan, Singapore, and Canada) and joined OECD and EU regulatory efforts. MOUs with Saudi and UAE tech funds hint at a Gulf-Israel AI corridor—pending broader normalization. But these partnerships lack funding, milestones, or clear delivery paths.
Meanwhile, the U.S. is investing $52B via the CHIPS Act. The EU, India, UAE, and Saudi Arabia are pouring in billions more. Israel’s response is still in draft form.
5. National-Level Preparation
Prepare Israeli society for the AI age: workforce retraining, education campaigns, and national safety frameworks.
What’s happened: Two of five ministerial “AI Impact Plans” (Education, Employment) are finalized. Three (Health, Transportation, Energy) are still in draft. A retraining pilot for 200 workers begins this June. A 10-city “AI Awareness” campaign will launch by year-end.
Again: intention is there. Execution is dragging.
And the Moonshots? Still Grounded.
The plan’s three headline projects for 2025—a foundational AI challenge, an applied-innovation fund, and a dual-use defense R&D initiative—remain unnamed, unfunded, and absent from the April 2025 progress report.
Leadership Vacuum
Worse, implementation now sits with Almog Cohen, a far-right parliamentarian from the Jewish Power party. He’s the newly appointed Deputy Minister for AI in the Prime Minister’s Office. His top priority? Relocate Israel’s compute infrastructure to the Negev and Galilee—regions with poor power infrastructure and sky-high cooling costs. There is no budget, timeline, or environmental assessment. I wrote about the appointment of Almog, who once ran a pizza chain, as Israel’s new AI Czar. Read it and weep.
Meanwhile, The World Builds
U.S. export controls on AI chips have softened—except for China. But Israeli firms still face exposure: under new U.S. rules, selling or even knowing about downstream use of chips in China can trigger penalties. Washington is watching closely.
Qatar is spending billions on AI and quantum. Saudi Arabia and the UAE are spending billions on AI and energy infrastructure.
And while others are accelerating, Israel’s AI strategy risks becoming a policy ghost: a well-written scaffold with no muscle behind it.
Blueprints don’t build power. Compute, capital, and clarity do.
Israel’s National Supercomputer Finally Has a Daddy. He Speaks Russian
TL;DR: After years of drift, Israel has picked Nebius—founded by Yandex’s Arkady Volozh—to build its $140M national AI supercomputer.
After multiple false starts, Israel’s long-promised AI supercomputer is finally moving ahead. The Innovation Authority has awarded the $140 million tender to Nebius, a Dutch-headquartered cloud company founded by Arkady Volozh, the Russian-Israeli tech mogul behind Yandex.
Volozh, who moved to Israel in 2014 after Russia invaded Crimea and became a citizen in 2017, now gets the keys to Israel’s top AI infrastructure project. Nebius beat out four rivals, and the system is expected to go live in early 2026.
Its mission: provide discounted compute power to startups, academics, and public-sector innovators—those priced out of the $2/hour GPU market. It’s part infrastructure, part industrial policy: help train large models in Hebrew, Arabic, and other niche domains.
But critics say it’s the wrong solution to the right problem. Why not fund R&D to reduce compute needs? Why build instead of subsidizing cloud credits on AWS or Azure? Owning hardware means upkeep, aging tech, and recurring costs—without clear advantage.
One industry veteran likens it to the Langley Aerodrome: a government-backed flop that spent millions trying to fly, while the Wright brothers quietly succeeded with less. The real AI breakthroughs may come not from state-run GPU farms, but scrappy startups flying under the radar.
Will this be Israel’s Wright moment—or another Langley crash? My roubles are on Langley.
Parmy Olson of Bloomberg Opinion writes on Trump’s visit to Saudi, saying the Gulf petrostate is building all the infrastructure for AI and energy, but lacks the AI talent to bring all that to life. Meanwhile, as I wrote last week, Israel has all the AI talent but lacks investment in AI and energy infrastructure. Wouldn’t it be great if that Saudi-Israel normalization happens one day? Both sides clearly need each other.
IDF’s $25B Desert Tech-Duty Gamble is Stuck in Neutral
TL;DR: Israel’s plan to relocate 20,000 intelligence and cyber troops to a new Negev campus by 2030 is facing mounting delays. Troop buy-in is weak, infrastructure is late, and political headaches are growing. The vision remains bold. The execution doesn’t.
Launched with fanfare, the IDF’s Communications Campus—“Kiryat HaTikshuv”—was meant to be a cornerstone of Israel’s military modernization. The plan: consolidate elite cyber, intel, and communications units into a high-tech hub in the Negev, and move 20,000 personnel south by the end of the decade. The price tag? Over NIS 25 billion ($6.7 billion).
Five years from deadline, the site is under construction. But the relocation is drifting. Troop numbers are far below projections. Infrastructure is incomplete. And internal resistance is growing.
A vision stuck in the sand
The Negev move is part of a larger effort to decentralize Israel’s defense assets and stimulate long-term economic development in the south. On paper, it’s everything modern strategy demands: resilience, dispersion, digital dominance.
In practice, it’s proving harder to sell. Especially to the officers and technologists expected to make it work.
Even if you build it they won’t come
At the core is a retention crisis. Officers from Military Intelligence and Unit 8200—the elite signals-intelligence unit often called Israel’s “NSA meets MIT”—are balking at the relocation.
And who could blame them? The Negev means long commutes, fewer services, and major disruptions to family life. Some have quietly warned they’ll leave rather than relocate. And in a military where know-how and continuity are force multipliers, losing experienced mid-career personnel could gut institutional memory at precisely the wrong time.
The IDF has tried to ease the transition with promises of new housing in Be’er Sheva and Yeruham, and a fast rail link from central Israel. But neither has materialized. Apartments are still under construction. The train is still a line on a map. Without them, the relocation remains a hard sell.
Legal landmine
The project also faces regulatory friction. Land ownership disputes—particularly with nearby Bedouin communities—have triggered delays. Negotiations are slow and politically sensitive. And until they’re resolved, construction and expansion plans remain vulnerable to legal action.
There’s also the question of local integration. One of the original goals was to turn the campus into an economic catalyst for the Negev. But defense experts warn that without deliberate policy engagement—workforce pipelines, R&D partnerships, regional planning—the site risks becoming a self-contained fortress, not a growth engine.
Timing couldn’t be worse
The timing doesn’t help. Israel is still managing an extended military campaign. Budgets are under strain. Regional threats are multiplying. At a moment when the IDF is being asked to do more with less, pouring billions into a long-term infrastructure gamble—one that depends on widespread officer buy-in and fragile logistical scaffolding—looks increasingly risky.
Miracle or Mirage?
This isn’t just about buildings. It’s about whether Israel can align its long-range defense planning with operational reality.
The concept is sound: consolidate talent, harden assets, boost national resilience, and seed southern growth. But vision alone won’t get it done. The army must secure buy-in from its best people. It must finish the infrastructure it promised. And it must manage the political and legal tensions that come with large-scale national change.
So far, none of that is guaranteed. The Kiryat HaTikshuv project is still a potentially transformative move. But if Israel can’t overcome the inertia—internal and external—it may go down as another overpromised, underdelivered mega-project.
Time, money, and talent are all running short.
Rehabilitating at scale: Israeli army turns to AI as war casualties overwhelm physiotherapists
AI-driven human movement tracking startup Sency has won the Israel Defense Force’s tender to digitize military physiotherapy—an urgent move as 16,000 wounded since the start of the October 7th War swamp Israel’s overstretched physical rehabilitation system.
Sency's technology converts ordinary cameras into precision motion analysis tools without specialized hardware. The AI analyzes video input from smartphones or webcams, tracks skeletal movement in real-time, and compares it against proper form templates. The system identifies deviations in posture, range of motion, and movement quality, then delivers immediate feedback through simple visual cues and corrective instructions.
Sency’s IDF win matters because it scales rehabilitation: a single app can support thousands, reducing demand on scarce physical therapists and letting patients recover anywhere, not just in packed hospitals.
Even before October 7, Israel was facing a critical shortage of rehabilitation facilities, physicians, physical therapists, and occupational therapists. Many soldiers face years of rehabilitation ahead after life-changing injuries. Now entering its 20th month, the war is putting extreme strain on the system. Rehabilitation centers are scrambling to expand capacity through fast-tracking planned facilities, repurposing existing wards, and seeking funding for new infrastructure and technology. What differentiates Sency is its ability to process its analysis on-device rather than requiring constant cloud connectivity, making it usable in bandwidth-limited settings.
Sency Co-Founder and CEO Gal Rotman, himself a reservist Captain in the Special Forces, says the company is growing rapidly into the digital health and wellness market, including helping a global wellness provider with some 40 million users boost engagement and retention rates, and conducting research with 2 US-based universities on fall prevention. The company has raised $7.5 million to date.
The $6B Cybersecurity Rocket Ship
Watch out WIZ, Cyera is coming for you. Cyera, an Israeli cybersecurity company founded in 2021, is reportedly closing a $500 million financing round at a valuation of $6 billion, representing a significant increase from its $3.4 billion valuation at the end of 2023. The company, led by former Unit 8200 veterans Yotam Segev and Tamar Bar-Ilan, specializes in data security solutions that identify and manage sensitive information in complex cloud infrastructures. This substantial investment, led by US funds Lightspeed, Greenoaks, and Georgian, reflects the growing importance of data security technologies in the cybersecurity landscape.
Star-Studded Defense Startup’s Secretive Unstealthing
A new Israeli defense startup called Line 5 has emerged from stealth with a $20 million seed round—making it one of the largest early-stage defense tech fundings globally this year. But beyond the big names and big $ number, details are scarce. That silence could signal classified ambitions—or just early-stage fog. The new startup has a landing page as a website, no product description, and no explanation of what it actually does—just a name and a mission, left deliberately vague.
To get a hint at what Line 5 might be cooking up, check out who its founders are: Gigi Levy-Weiss, a former Israel Air Force combat pilot and investor at NFX, former Special Operations combat soldier Yiftach Shoolman, who also founded database company Redis Labs, Sari Brosh, an experienced R&D operator who previously managed SpaceIL operations, and Matan Melamed, formerly VP Counter Drone at autonomous drone company Airobotics.
So let’s see, we have a former combat pilot and star VC, a former special operator who built one of the world’s best database companies, an R&D whiz who managed a space startup, and a counter-drone expert from one of Israel’s most successful drone companies. I’m stumped! What could this team possibly be up to??
Calcalist reports that the company’s name, Line 5, is a memorial to Shoolman’s former partner, who was murdered in a Tel Aviv bus bombing in the 1990s. According to Gil Friedlander, Managing Partner at defense-related VC Iron Nation, and an investor in Line 5, Iron Nation, born in the aftermath of Oct 7, is on a mission to support solutions “that ensure such atrocities never happen again.” Line 5 is welcome news. As I’ve reported, Israeli defense tech startups have found it difficult to penetrate the Israeli defense market, so the involvement of proven tech operators with committed investors is a great sign.
In other stealth defense tech startup news: Josh Wolfe of Lux Capital told a defense tech webinar hosted by Protego Ventures that his firm has invested in 2 new defense startups in Israel that are still in stealth. Both companies are setting up US operations in DC. Wolfe said another stealth defense startup has at least 4 top US VC funds competing to invest in.
Lux Capital, which manages a $5.5 billion fund, no longer requires dual-use applications and are open to funding companies focused solely on defense applications, even if they involve offensive capabilities, provided the intent aligns with reducing human suffering.
e-Commerce is so 2024. Welcome to a-Commerce
Nekuda's $5M funding round, backed by finance titans Amex Ventures and Visa Ventures, builds the missing infrastructure for "a(gent)Commerce"—the natural evolution beyond e-commerce where AI completes transactions without human intervention. While OpenAI's shopping features and Amazon's "Buy for Me" function show promise, they all hit the same wall: checkout demands human clicks because payment systems expect a person, not software, to authorize purchases. Nekuda solves this with two practical tools: a secure agent wallet that safely stores payment credentials, and an "agentic mandate" system that clearly defines what agents can buy with specific limits and conditions. Commerce is shifting from humans shopping online to AI agents executing purchases based on our instructions. The investment by the venture arms of Amex and Visa is notable. By removing the "human in the loop" requirement at checkout, Nekuda unlocks economic activity currently stalled by this technical limitation and makes the "No Card No Human" approach to shopping practically achievable for the first time. Good readout from the company here.
Everything Else
Double AI, or AAI, a (you guessed it) AI startup founded by Mobileye founder and CEO Amnon Shashua, has secured $25 million in its first external funding round, TheMarker (Hebrew) reports. The investment was led by Dell Technologies Capital, BRM, and Pitango. AAI is developing an AI model focused on Expert Artificial Intelligence (AEI) rather than General Artificial Intelligence (AGI). Here’s their paper if you want to geek out, but basically, unlike general AI systems that attempt to mimic the entire human brain, AAI's expert-focused approach emulates the thinking of human specialists in fields such as science, engineering, and mathematics. The founding team includes Shai Shalev-Shwartz (Mobileye's CTO), Dr. Gal Beniamini and several computer scientists from Shashua’s other companies OrCam (which has in the meantime closed down) and AI21 Labs (which has lost some top talent recently). Shashua's growing portfolio of companies now includes AAI, Mobileye, OrCam, Mentee Robotics, AI21 Labs, and One Zero, a digital bank. I like to think of Shashua as Israel’s Elon Musk.
Microsoft is treading a tech tightrope. The company just announced that an internal probe found no proof that its cloud and AI tech, used by the Israeli military, hurt Gaza civilians. At the same time, The Verge reports the company is blocking staff emails with words like “Palestine,” “Gaza,” and “genocide”, both internally and externally—calling it a move to keep politics out of inboxes. Activists who call themselves No Azure for Apartheid (NOAA) inside Microsoft see this as censorship. Executives say it’s about keeping work focused. Instead of giving in to employee pressure, Microsoft is drawing a sharp line. Politics belong in opt-in forums, not mass emails. This signals a shift: big companies are less willing to let activism steer the business, especially when democratic allies are involved. The cost? Some staff are upset, but Microsoft keeps its priorities clear—security and business over culture war theatrics.
Bright Data, an AI infrastructure data company, has launched a new venture capital fund called Bright Venture that specifically targets early-stage Israeli AI startups. The fund differentiates itself from traditional VC firms by offering not only financial investment but also providing $200,000 worth data access, advanced data collection infrastructure, up to $5 million in cash and data tokens, and $1 million worth of data mining credits. Led by CEO Dana Mazia, the fund focuses on AI-native and AI-First companies developing AI infrastructure, GenAI applications, and other AI solutions, leveraging Bright Data's position as a leading public data platform serving over 20,000 organizations worldwide.
People Moves
Or Adar, a leading Israeli drone specialist and Director of Product at drone traffic management startup Airways, has been appointed to spearhead human capital development in the government's "UAVs as a National Growth Engine" initiative. The project—backed by the Ministry of Economy, Yeruham Council, and UVID—aims to position Israel as a global drone technology leader by developing comprehensive career pathways from education through industry. The appointment underscores Israel's strategic commitment to expanding its UAV sector, with focused efforts on increasing companies, jobs, investments and exports in this rapidly evolving field.
Hilla Haddad Chmelnik, a former director general of the Ministry of Science and Innovation, has launched (literally) new venture involving pods that launch medium payloads to space. Seems simple enough. (Thanks to Amitai Ziv for the tip).
Opportunities
First Major Tech Conference for Orthodox Jewish Women Set for July 23: The inaugural She Tech Time conference, Israel's first major tech event specifically for Orthodox Jewish women in technology, will take place July 23 at Expo Tel Aviv. The groundbreaking initiative aims to connect talented Orthodox women already working in tech with advanced technological content, industry leaders, and potential employers. Organizers are currently seeking corporate sponsors, exhibitors, and speakers to support this diversity initiative. The conference follows earlier successful women-in-tech events like "she con" in 2019, which attracted over 600 female software developers, and addresses the continuing need for professional development opportunities for underrepresented groups in Israel's tech ecosystem.
Israeli computer vision firm PROTRACK, which has built a GNSS-independent aerial positioning system, is seeking an AI partner to help solve a complex visual-language grounding challenge: interpreting natural-language spatial instructions into visual understanding. The goal is to apply for Germany’s SPRIND innovation challenge. Tasks include object localization from spoken/written cues in real-world environments.
Code for Israel just launched their annual call for applications for nonprofits that could use a tech boost. Whether it’s a system that helps process daily mental health requests, a chatbot that makes children with disabilities feel seen, or a platform that identifies at-risk teens online and helps save lives - this is the kind of impact Code for Israel tech volunteers are creating.
See you next week. Drop me your comments/feedback/tips amir@israeltechinsider.com