The Defense Industry’s AI Revolution: A New Frontier in Warfare and Procurement
- Mark Aslett
- Oct 22, 2024
- 4 min read
FT Article: War in the age of AI demands new weaponry
As global tensions rise—from Russia’s war in Ukraine to the latest events in Gaza—defense budgets worldwide are increasing dramatically. In fact, global military expenditure has surged by 34% over the past five years. This is not just a story of more weapons but one of innovation. The next big technological leap in defense lies in artificial intelligence (AI), where new weapons systems must be affordable, attritable, and abundant. With this boom, defense start-ups are set to play a vital role, opening doors to innovation in an increasingly unpredictable world.
Global Instability and Defense Spending
In the current geopolitical landscape, uncertainty reigns. Russia’s aggression in Ukraine, rising tensions between China and Taiwan, and the escalation of violence in Gaza have contributed to a global spike in defense spending. Nations are rapidly updating their arsenals, and traditional defense primes like Lockheed Martin, Raytheon, and Northrop Grumman are seeing significant new orders. This growth is not just limited to the United States; NATO countries are increasing their defense budgets, with 23 member nations meeting or surpassing the 2% GDP defense spending target in 2023, up from just nine in 2020.
Amidst this defense boom, we are also witnessing a technological revolution. AI is transforming everything from finance, healthcare to logistics, and now it is set to revolutionize warfare. The rise of AI in defense creates opportunities for both established companies and start-ups to shape the future of military technology. Decision-makers are now more focused on affordability and flexibility, favoring systems that can adapt to rapid changes on the battlefield.
Lessons from Ukraine and the Future of Warfare
1. Retooling the Arsenal: Moving Beyond "Exquisite" Systems
One of the key lessons from Ukraine is that you go to war with the army and capabilities you have, not the ones you want. In light of this, the U.S. must not merely replenish its stockpiles of arms but invest in modernization. The focus has been on sophisticated, high-margin systems like the F-35, which come with expensive logistics chains—ground crews, refueling planes, and more. But we need to rethink this strategy. AI-driven autonomous systems, like drones, offer cheaper and more versatile alternatives. These innovations can supplement, if not replace, traditional fighter jets and manned systems in certain combat scenarios.
This shift is already evident in how defense primes are positioning themselves for the future. We are seeing strategic acquisitions of start-ups by large defense contractors, which allows for an influx of new ideas into an industry sometimes mired in legacy systems. By acquiring companies specializing in AI and autonomy, primes not only enhance their R&D capabilities but also prepare for a future where defense is defined by AI-driven platforms rather than traditional, costly weaponry.
2. Communication in Contested Environments: Surviving Electronic Warfare
A second lesson from the Ukrainian conflict is the need for reliable communication systems in electronic warfare environments. The war has demonstrated how easily conventional GPS-based navigation systems can be compromised. In many cases, Ukrainian forces found themselves unable to navigate or target enemy positions due to GPS jamming and spoofing. This is where the U.S. must pivot to newer technologies like quantum navigation or visual odometry, which offer alternatives to GPS and are more resilient in contested environments.
The broader challenge is ensuring that these systems remain interconnected and functional under duress. AI has a key role to play here—developing autonomous decision-making capabilities that can react to changing circumstances on the battlefield in real time, even when communication links are compromised. Defense planners need to prioritize these technologies in procurement, as future conflicts will likely be fought in environments saturated with electronic warfare, where resilience and flexibility will be critical.
3. The Asymmetry of Modern Conflict: Cost-Capability Disparities
Perhaps the most striking lesson from Ukraine is the imbalance between cost and capability in modern warfare. It is not sustainable for the U.S. or its allies to continue intercepting low-cost drones with very expensive Patriot missiles. Asymmetric warfare, where high-cost systems are employed to counter inexpensive but effective threats, is a real concern for the Pentagon. This dynamic is especially evident in the context of China's anti-ship ballistic missiles, which cost a fraction of the U.S. aircraft carriers they are designed to target.
The solution lies in embracing lower-cost, software-driven weapons systems that can be deployed in greater numbers. AI-driven technologies enable these systems to communicate, adapt, and function as a cohesive unit, offering a cost-effective solution to emerging threats. However, realizing this vision requires procurement reforms that move away from "best price" contracts and embrace a more holistic approach—one that considers total life-cycle costs, supply chain resilience, and adaptability.
Reshaping U.S. Defense Strategy
The U.S. is at a crossroads in defense spending. Although there is momentum behind increased budgets, there are warning signs that this growth cannot continue unchecked. In 2024, the cost of servicing the national debt exceeded annual defense spending for the first time, raising concerns about fiscal sustainability. Moreover, personnel costs continue to rise, threatening to crowd out funding for modernization and weapons development.
Yet, there are reasons for optimism. Initiatives like the Defense Innovation Unit, which saw a fivefold increase in its budget last year, are indicative of a shift in focus towards innovation. These efforts must continue, as they represent the best chance for the U.S. to maintain its technological edge in the face of growing threats.
Embracing the Future of Warfare
As we look to the future, it is clear that innovation in AI and autonomous systems will shape the next generation of military technology. The defense industry must move beyond the systems that have defined past conflicts and embrace the weapons of the AI age. As defense budgets rise, we must seize this moment to rethink procurement, invest in new technologies, and build an arsenal that is both capable and adaptable. The challenges are immense, but the opportunities for innovation are even greater.
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