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| By Chris Graebe |
Like me, many of you probably pray for world peace on a regular basis.
The reality, though, is that domestic and international conflicts and all-out wars have been a part of life ever since humans roamed the Earth. And, unfortunately, I think that’ll always be the case.
The reasons for and motivation behind conflicts haven’t changed much over the centuries: national security, interests in resources, retaliation, religious differences, show of superiority, etc.
However, weapons used by the world’s militaries have changed enormously. And those countries that don’t keep up with the latest, greatest and smartest versions are destined for defeat.
Far from the bows and arrows used in the War of 1812, today’s wars in Europe and the Middle East are being fought with more sophisticated and advanced weaponry, such as computer-operated drones and remote-controlled vehicles and robots.
Also referred to as unmanned aerial vehicles (UAVs), drones are taking center stage in two major conflicts happening simultaneously between Russia and Ukraine, as well as in Israel and the Gaza Strip.
This has raised the profile of drones as tools of war and the number of …
Military Drone Startups
In fact, drones have become so useful in modern warfare that the United States Air Force now employs more drone pilots than traditional pilots.
That shouldn’t come as a surprise because the U.S. military has invested heavily in drone technology over the years, spurring rapid advancements. Here’s why …
- First, drones provide greater accuracy in target acquisition. Unlike traditional aircraft, drones are capable of flying lower and slower, allowing them to better identify targets and carry out precision strikes. They also have the ability to stay in the air longer than a manned aircraft and extend surveillance and strike operations.
- Second, drones increase safety. Since they are remotely operated, they are not exposed to the same risks associated with traditional warfare. They also reduce the need for ground troops, which can significantly reduce the number of casualties.
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- Third, drones improve situational awareness. They are equipped with a variety of sensors, including infrared cameras, that collect real-time information about enemy movements and locations. This can help make better decisions and provide more accurate intelligence.
- Lastly, and most importantly, drones can operate in dangerous areas. This enables them to successfully carry out critical military operations without endangering the lives of military personnel.
As a result, many nations have invested in developing and deploying these systems, leading to notable growth in the military drone market in recent years — and for the future, as well.
This market is expected to more than double from $13.42 billion in 2022 to $28.84 billion in 2023.
And as much as I hate war, I’d be foolish to ignore the investment opportunities at our fingertips. So, I’m going to share the name of two startups gunning for lucrative military contracts in the drone industry.
The first, High Point Aerotech, is focused on anti-drone technology, which are drones designed to take down the enemy’s drones. The Boise, Idaho-based company makes a product called a “Sawtooth” that identifies, tracks, detects and defeats enemy drones.
After an acquisition by a larger entity, the company recently secured a $900-million, five-year contract to provide their systems to the U.S. military on an as-needed basis.
The Sawtooth is also used outside of the military for critical infrastructure, protection at large gatherings like sporting events and even at the Mexico border.
Another startup that I want to share is bringing the world of AI and fighter drones together: Shield AI. This is a technology you definitely want on your side. In fact, your newest contributor, Michael A. Robinson, introduced you to Shield AI on Friday.
The company developed an AI pilot that allows swarms of drones and aircraft to operate autonomously without GPS, communications or a pilot. Called Hivemind, it is the first and only fully autonomous AI pilot deployed in combat since 2018.
So, it’s not surprising that San Diego-based Shield AI is crushing it. The company conducted a funding round back in December 2023 and raised $100 million — but at a $2.8 billion valuation!
The Future of Defense-Tech Startups
Investing in startups in this arena can be risky. No doubt about it. That’s especially true for those in the early stages of trying to secure lucrative contracts that may take years to pay off. Companies can actually go broke trying to prove the viability of a product and getting it approved for actual use.
Look, everyone loves money, but I don’t know anyone who likes war. So, investing in private companies aiding the military’s efforts isn’t for everyone.
It’s a personal choice to invest (or not invest) in technology that can both keep civilians safe and kill the enemy. Just know that U.S. military spending has risen or remained flat every year since 1960, except 1991.
As global conflicts become more and more frequent, countries will continue to increase the size and technological footprint of their militaries.
Bigger and better weapons also require more robust spending. For the U.S., that meant pouring $87.9 billion into its national defense last year — accounting for about 12% of all federal spending.
And much of that money is up for grabs in the form of federal grants and government contracts. This sets the stage for startups building new technology to swoop in for huge paydays, courtesy of Uncle Sam.
Venture capital investment in startups building defense technology, including drones, exceeded $30 billion a year for the past three years, about five times what it was in 2016, according to PitchBook Data. About 100 new defense-tech startups have been founded in the U.S. in the past three years.
So, there are plenty of startups to choose from in this arena. However, you’ll want to find those with government contracts or strong funding like High Point Aerotech and Shield AI that are already attracting and receiving money.
Or you can always take the public route, and consider buying shares of AeroVironment (AVAV), a $4.5 billion military drone and robotics systems manufacturer, known for the very deadly munition drone called Switchblade.
So far, five different NATO nations have placed orders with AVAV, and the company has received clearance to sell Switchblades in almost 50 different countries — up from 20 last year.
Only you can decide what’s best for you. That might mean researching a startup or two, or buying shares of a stock. Or you could do neither and just keep praying for world peace.
That’s it for today, my friend.
Happy hunting,
Chris Graebe
P.S. Be sure to keep an eye on your inbox for an email we’ll be sending a little later today for some exciting updates about our new AI-powered stock trading system, IRVING!
