VC, by definition, primarily banks on moonshots. That’s not unique to defense.

Fair.

I don't have a good frame of reference to know when VCs consider the industry worth pouring more money into or if it's a black hole for investment.

Surely there's gotta be some point where the industry has to prove itself worth additional investment $ rather than banking on finding another company where over 80% its valuation is based on memes and dreams (see: SpaceX) or has cartoonishly inflated expectation of future profitability (see: Palantir).