Coming Soon to a War Zone Near You: 'Slaughterbots'

Imagine swarms of tiny drones. Now, imagine them armed with lethal weapons and artificial intelligence.

It seems like bad science fiction. It’s not.

The technology already exists, says Alvin Wilby, an executive at Thales U.K., a major European defense contractor.

This week, Wilby told a British government committee that it’s just a matter of time before terrorists unleash “swarms” of small, lethal, smart-drones.

And other people who should know are worried, too.

Like Noel Sharkey, emeritus professor of artificial intelligence and robotics at the University of Sheffield.

And like noted theoretical physicist Stephen Hawking and tech leader Elon Musk.

Sharkey recently told the BBC that he fears untested, makeshift technology could end up in the hands of terrorists.

Hawking warned: “The development of full artificial intelligence could spell the end of mankind.”

And Musk declared that AI is “our biggest existential threat.”

It’s easy to dismiss such worries. However, we live in an era where information technology progresses at an exponential rate. Amazon (AMZN), Intel (INTC) and Qualcomm (QCOM) have already demonstrated drones capable of autonomous navigation and targeting.

And scaling up the technology to swarms would not require “any inventive step,” says Sharkey.

Last October, the U.S. Air Force demonstrated how a swarm of autonomous drones might be used for surveillance.

Three F-18 Super Hornets released 103 drones with only a 12-inch wingspan. The diminutive Perdix devices shared a single software brain. It was programmed with one, unrelenting purpose – to avoid radar installations.

In the test, the drones behaved as one unit. There was no leader.  As in nature, the swarm adapted to lost members.

Weaponized drones have become a mainstay in modern warfare.

Last year, the U.S. Navy showed off a drone system that is launched into the sky like a missile.

Once airborne, Locust drones, loaded with micro-explosives, form packs. Then the packs communicate with custom-radar using algorithms.  Collectively, they locate targets, then dive bomb, kamikaze-style.

“Slaughterbots” is a new short film that melds the advances made by the military and private business into a dystopian nightmare.  The film’s hook: “Watch what happens when the weapons make the decisions.”

It’s as scary as it seems.

However, all of the technology to make it happen exists today, and it is progressing at an exponential rate. Smartphones gave us MEMS, or Micro-Electro-Mechanical systems. Electric components, like accelerometers, GPS, and solid-state compasses are finally small and inexpensive enough.

And because billions of people are carrying smart devices everywhere, there is enough data to finally fuel the artificial intelligence revolution scientists promised decades ago.  Algorithms are getting better every minute as they chew up, and digest the deluge of data.

Along the way, investors have accumulated massive profits.  With careful selection, the next step might be even more lucrative.

Artificial intelligence is creating distinct winners and losers.  It is concentrating power among those firms that bet early and wisely. They have economies of scale. They also have the power to erect unique barriers to entry.

Hopefully, the drones of “Slaughterbots” will remain fiction.  But their very possibility creates a bonanza for a few defense contractors. Well-placed fears mean it is likely to be a major new part of the sector.

The number of conglomerates capable of meeting this challenge is tiny.

Those companies, and their supplier ecosystems, are going to win an enormous prize when contracts get doled out in the heat of the paranoia.

Remember, these are government contracts.  Companies need to meet stringent security guidelines.

I have been positioning my members in these stocks for two years.  I have provided exact entry, and stop levels along the journey.

This is a really big trend.  It is going to happen, and investors need to begin taking positions now. Here’s one good bet: Elbit Systems (ESLT), an international defense contractor based in Israel.

The genie is out of the bottle. And he’s got a laser-guided bazooka over his shoulder.

Best wishes,

Jon Markman