Authored By: Sarah
07 Feb 2025

Artificial Intelligence in Military Market Size 2024-2028: Growth, Trends, and Challenges

The artificial intelligence (Ai) in military market is poised for significant growth, with an estimated increase of USD 55.19 billion at a compound annual growth rate (CAGR) of 43.61% between 2023 and 2028. This surge in market size is being propelled by key drivers such as escalating government defense spending due to ongoing global conflicts, rising private investments in AI research and development, and advancements in self-driving systems and armored vehicles. The integration of AI and automation technologies into defense operations is advancing military capabilities and reshaping warfare strategies globally

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Market Segmentation

By Component:

Software: AI’s role in enhancing military software is pivotal. It strengthens IT infrastructure to prevent data breaches, supports intelligent applications for machine learning and speech recognition, and enhances military cybersecurity. The software segment is expected to experience significant growth due to its transformative impact on military operations like surveillance, training, and cybersecurity.
Hardware: Includes AI-enabled military hardware like unmanned aerial vehicles (UAVs), unmanned ground vehicles (UGVs), and other defense systems.
Services: AI services for military applications continue to evolve, supporting innovations in AI development and implementation.

By Type:

New Procurement: The largest market share was held by the new procurement segment in 2023, driven by government pushes to integrate AI into military systems. The US Department of Defense, for example, is accelerating AI adoption through expedited procurement processes. This expansion is fueled by the tactical benefits AI brings to defense operations.
Upgradation: The demand for upgrading existing systems to incorporate AI is growing as nations modernize their military technologies.

By Region:

North America: Dominates the market with an estimated 55% contribution to global growth. The US, being at the forefront of AI development for military applications, is focusing on strengthening its defense capabilities through AI-driven solutions. Canada and Mexico also contribute significantly, supported by their robust defense sectors.
South America: Countries like Chile, Brazil, and Argentina are increasing defense spending to incorporate AI into military technologies.
Europe: The UK, Germany, and France are major contributors, with increasing investments in AI systems for defense and surveillance purposes.
APAC: China and India are major players in this region, making substantial investments in AI for military modernization and autonomous defense systems.
Middle East & Africa: Saudi Arabia and South Africa are investing in AI to enhance military operations, driven by the need for advanced defense technologies.

Market Drivers

Increased Government Spending on Defense: Rising global territorial disputes, particularly in the South China Sea, have led nations to allocate higher budgets for advanced military technologies, including AI-powered weapon systems. Countries are enhancing their defense capabilities to secure borders and address growing security concerns.
Technological Advancements: Innovations in autonomous systems, such as UAVs and UGVs, are reshaping military operations. AI is increasingly integrated into these systems, offering real-time situational awareness and operational efficiency.

Significant Market Trends

AI in Space-Based Systems: The integration of AI in space technologies is growing, with AI enhancing satellite capabilities, tracking objects, and recognizing threats. Both developed and developing nations are increasing investments in AI for space applications, which is expected to boost market growth.
AI in Autonomous Military Systems: The development of AI-driven autonomous vehicles and robots is revolutionizing warfare. These technologies are expected to play a pivotal role in future military operations, including surveillance, logistics, and combat scenarios.

Challenges

Shortage of AI Experts: One of the primary challenges hindering market growth is the shortage of skilled AI experts. Companies and governments are struggling to find the necessary talent to drive AI development and integration into military systems. The specialized infrastructure and investment required for AI applications are also limiting adoption, particularly for smaller organizations.

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