Global AI in Defense Market 2024-2031

AI in Defense Market Size, Share & Trends Analysis Report by Component (Hardware, Software, and Services), by Platform (Air, Land, Naval, and Space), and by Application (Cyber Security, Logistics & Transportation, Simulation & Training, Battlefield Healthcare, Threat Monitoring, Surveillance and Situational Awareness, Command & Control, Simulation & Training, Threat/Target Tracking and Monitoring, Information Processing, and Others), Forecast Period (2024-2031)

AI in the defense market is anticipated to grow at an exponential CAGR of 36.1% during the forecast period (2024-2031). The market growth is attributed to the increasing adoption of modern Al-enabled systems that improve military systems' effectiveness and fortify their capabilities in areas of warfare globally. Emerging countries leverage AI across various domains, revolutionizing threat assessment, logistics optimization, cybersecurity, and surveillance with AI-powered UAVs with investment in AI in defense. For instance, in January 2024, according to the Observer Research Foundation (ORF), the Ministry of Defense (MoD) committed an annual budget of INR 100.0 crore ($12.0 million) for the next five years to the Defense Artificial Intelligence Project Agency (DAIPA).

Market Dynamics

Development of Advanced and Sophisticated Defense Equipment

To effectively tackle emerging threats to national security, militaries concentrate on developing and implementing innovative and complex equipment. The development of directed energy weaponry, space militarization, and hypersonic travel are a few recent instances. International military agencies are spending money on electrification methods for the battlefield. The value of electronic warfare systems has increased as a result. As a result, more goods are being introduced into the defense military market, such as RF jammers and anti-drone systems. In these circumstances, AI-enabled drones can also be useful. They can keep an eye on border regions, identify dangers, and notify response teams. They can also improve the defenses of military installations and make soldiers safer during conflict.

Artificial Intelligence in the Surveillance, Intelligence, and Reconnaissance Mission

Artificial Intelligence enhanced computational military reasoning for surveillance, intelligence, and reconnaissance (IS) missions. Machine learning aids in the analysis of new military product iterations and provides military equipment and other asset upkeep that is intuitive. The acceptance of self-organizing intelligence systems is one of the key new developments in defense strategy and policy. As a result, these systems can cooperate to achieve a strategic defense objective. The Portable Ground Surveillance Radar by Shoghi is a defense communications equipment that makes use of AI-powered multi-sensor integration software. It has a user-friendly interface and an adjustable alarm system that promptly detects, categorizes, and assesses the locations of potential threats.

Market Segmentation

• Based on the components, the market is segmented into hardware, software, and services.
• Based on the platform, the market is segmented into air, land, naval, and space.
• Based on the application, the market is segmented into cyber security, logistics & transportation, simulation & training, battlefield healthcare, threat monitoring, surveillance and situational awareness, command & control, simulation & training, threat/target tracking and monitoring, information processing, and other (warfare platforms).

Software is Projected to Hold the Largest Segment

The software segment is expected to hold the largest share of the market. The primary factors supporting the growth include the increasing demand for Al-powered software solutions to develop modern Al applications and related software development kits. To provide an intelligent response, the software gathers information from hardware systems and Al systems' processes. Voice and speech recognition, virtual assistant, and machine learning are all included in the Al software. These technologies enable operators in the field to leverage AI insights to make decisions across many fused domains. For instance, in July 2022, the US Army Research Lab expanded its artificial intelligence and machine learning contract with Palantir for $99.9 million. Palantir's platform has supported the integration, management, and deployment of relevant data and AI model training to all of the Armed Services, COCOMs, and special operators. This extension grows Palantir's operational RDT&E work to more users globally.

Cyber Security Segment to Hold a Considerable Market Share

The cyber security segment is expected to hold a considerable share of the market. The factors supporting segment growth include increasing adoption of AI-based support incident response, swiftly assessing assaults, making remedial recommendations, and automating damage-minimization solutions. Machine learning algorithms that examine email content, sender behavior, and software features to identify and stop risks, and enhance the detection of malware and phishing attempts. Market players upgrade their AI-based offering to proactively defend against advanced attacks and stay ahead of emerging threats. For instance, in August 2023, BlackBerry Ltd., announced a major update to its patented Cylance(R) AI engine, marking a significant leap forward in predicting cyberattacks for proactive cyber defense. Predictive cybersecurity is necessary for emerging cyber risks and is seen as the future of cybersecurity. BlackBerry's Cylance AI has unfailingly protected businesses and governments globally from cyberattacks since its inception, with a multi-year predictive advantage.

Regional Outlook

Global AI in the defense market is further segmented based on geography including North America (the US, and Canada), Europe (UK, Italy, Spain, Germany, France, and the Rest of Europe), Asia-Pacific (India, China, Japan, South Korea, and Rest of Asia-Pacific), and the Rest of the World (the Middle East & Africa, and Latin America).

Growing Adoption of AI in the Defense Sector in Asia-Pacific

• The regional growth is attributed to countries such as China, South Korea, and India are known to be developing capabilities to weaponize AI by investing more in their defense budget. For instance, in March 2023, the State Council Information Office (SCIO) of the People's Republic of China, China's 2023 defense budget to increase by 7.2%. The planned defense spending is 1.6 trillion yuan (about $224.8 billion) in 2023. Its increased defense expenditure helps provide Chinese forces with better training and more advanced equipment. It also supports the military in tackling non-conventional security threats such as major pandemics and natural disasters, extending helping hands to people in need in and outside of China.
• In July 2022, the Ministry of Defense (Government of India) introduced 75 newly developed artificial intelligence (AI) products/technologies during the first-ever 'AI in Defense' (AIDef) symposium and exhibition. These include AI platform automation, autonomous/unmanned/robotics systems, blockchain-based automation, command, control, communication, computer & intelligence, surveillance & reconnaissance, cyber security, human behavioral analysis, intelligent monitoring systems, lethal autonomous weapon systems, logistics, and supply chain management, operational data analytics, manufacturing and maintenance, simulators/test equipment and speech/voice analysis using natural language processing.

North America Holds Major Market Share

North America holds a significant share owing to numerous prominent AI in defense companies and providers such as General Dynamics Mission Systems, Inc., IBM Corp., L3Harris Technologies, Inc., and Lockheed Martin Corp. in the region. The expansion of the market in the region is driven by rising US Department of Defense spending on R&D for advanced defense equipment and rising purchases of Al-enabled gadgets for defense operations. For instance, in May 2023, NSF announced seven new National Artificial Intelligence Research Institutes. The US National Science Foundation, in collaboration with other federal agencies, higher education institutions, and other stakeholders, announced a $140.0 million investment to establish seven new National Artificial Intelligence Research Institutes. The team of researchers collaborates with experts in security operations to develop a revolutionary approach to cybersecurity, in which AI-enabled intelligent security agents cooperate with humans across the cyber defense life cycle to jointly, improve the resilience of security of computer systems over time.

The major companies serving the AI in defense market include BAE Systems Plc., IBM Corporation, L3Harris Technologies, Inc., Lockheed Martin Corporation, and Thales Group, among others. The market players are increasingly focusing on business expansion and product development by applying strategies such as collaborations, mergers, and acquisitions to stay competitive in the market. For instance, in August 2023, the Department of Defense (DoD) announced the establishment of a generative artificial intelligence (AI) task force, an initiative that reflects the DoD's commitment to harnessing the power of artificial intelligence responsibly and strategically. The adoption of generative AI models while identifying proper protective measures and mitigating national security risks that may result from issues such as poorly managed training data.