Growing Defense Sector: Military modernization efforts in the face of geopolitical tensions

2 Min Read

The defense industry is undergoing significant transformation thanks to AI and robotics, enabling more efficient operations. The rise of defense startups is also disrupting the industry, along with advancements in autonomous weapons systems and the electrification of military vehicles.

Spending on global defense initiatives is expected to grow at a 5.37% rate from $2.012 trillion in 2023 to $2.120 trillion in 2024¹. This growth is linked to an increase in military funding driven by rising geopolitical tensions, and an effort towards military modernization to better position the United States to respond to security threats.

Recent interest in defense market projects at Apex Leaders includes:

• Naval ship MRO services
• Lithium-ion components and aerospace components
• Naval sonar components

As tensions rise and the defense landscape continues to evolve, we expect to see middle market spending in the Aerospace & Defense sector to continue to rise.

Investor Insights

• Autonomous counter-drone systems: The anti-drone technologies market is growing based on a rising incidence of critical infrastructure security breaches by unidentified drones and terrorist groups. The anti-drone market is valued at $2.03 billion in 2024, and is expected to reach $6.31 billion by 2029, growing at a CAGR of 25.46%². This market is semi-consolidated in nature, with several key OEMs like Lockheed Martin Corporation, RTX Corporation, THALES, and others.
• Enhanced Space Situational Awareness (SSA): The adoption of SSA capabilities by global defense forces will be driven by an increased threat from a growing number of objects in space. There is a need for advanced threat warning and assessment technologies to address concerns around space debris, cyber threats, and hostile maneuvers. The U.S. government is also the largest purchaser of satellite imagery, giving investors confidence in a long-term partner for growth³.
• Electric military vehicles: The electrification of military vehicles is forecasted to grow in response to government initiatives that aim to achieve zero emissions by 2050. For example, the Department of Defense has mandated all military branches to convert their fleets of non-combat vehicles from gas powered to electric by 2035⁴. However, logistics in power and charging remain a challenge. This provides opportunities for the commercial automotive, battery development, and utilities industries to potentially disrupt the market with advancements in power distribution and battery storage technologies⁵.
• Naval fleet modernization: The 2024 U.S. Department of Defense budget includes $48.1 billion for sea power investments and $52.8 billion allocated toward naval readiness.6 This push for naval fleet modernization creates opportunities for investments into areas such as software development, particularly in cybersecurity and AI, along with onboard technologies like defense and radar systems.

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Resources:

¹Defense Industry Outlook 2024: Key Trends Driving the Global Landscape
²Anti Drone Market Size & Share Analysis – Growth Trends & Forecasts (2024 – 2029)
³Space Situational Awareness (SSA) Market
⁴The military is converting to electric vehicles on bases, but charging them remains a challenge
⁵Military Vehicle Electrification Market
⁶Putting the Naval Ship Ecosystem on Investors’ Radar