Key insights
- The ongoing conflict in Ukraine highlights the increasing threat and effectiveness of drones in modern warfare, presenting a significant shift in military strategy. This trend suggests a growing demand for anti-drone technologies, which are seen as less susceptible to commoditization than drones themselves due to their complex systems, software, and sensors. Defense stocks, particularly those focused on anti-drone solutions, may see increased investment as governments and private entities seek protection for critical infrastructure and high-value locations.
Drones are now the number one cause of casualties in Ukraine. They are also the cheapest way to kill someone, at about $800/casualty. Pretty clear that this is the way war will be conducted in the coming era and that our existing legacy defense hardware is nearly useless in defending against them.
I don't think there is a ton of money to be made in drones themselves bc they will be a commodity. However I think anti-drone tech is much harder to commoditize bc it involves multiple layers of systems and advanced software and sensors. In the future I imagine every military base, airport, sports stadium, office tower will want some sort of anti-drone protection.
Looking at AVAV, LASR, ASX: DRO and some others based on this thesis. The defense sector got frothy last year but dropped a lot around October. They seem to be picking up steam again.