Market Introduction

The global AI in military market was valued at USD 9.40 billion in 2024 and grew at a CAGR of 12.50% from 2025 to 2034. The market is expected to reach USD 30.52 billion by 2034. The increasing investment in defence sector worldwide will drive the growth of the global AI in military market.

The concept of Artificial Intelligence (AI) in the military is based on the implementation of intelligent algorithms, machine learning models and autonomous systems into defence processes to facilitate better decision making, improvement of efficiency and better combat readiness. It has a great number of possible applications which include surveillance and reconnaissance, logistics, cyber operations, and autonomous weapons systems. Another primary value of using AI is in the data processing and analysis model; through its ability to analyse large amounts of data on the battlefield, such as satellite images and intelligence packets, as well as data about military battles and patterns, AI can help military strategists determine threats, patterns, and active opportunities much faster than reaction time human-only. Within the context of cybersecurity, AI can enable the protection of key military networks by means of real-time detection of vulnerabilities and responsive actions to the threat. Simulation-based training is also possible with AI, thus providing a realistic combat scenario and decision-making tasks to soldiers. Moreover, AI can be applied in predictive maintenance of military equipment, which will result in ensuring that repair is done in good time, reducing downtime.

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Recent Development

• In addition to other civilian areas, the People's Liberation Army (PLA) of China has begun employing the recently launched Chinese AI tool "DeepSeek" for non-combat support roles, particularly in military hospitals, to help the doctors create treatment plans.  According to the Hong Kong-based South China Morning Post, the People's Armed Police (PAP), PLA hospitals, and national defence mobilisation institutions are using DeepSeek's open-source large language models (LLMs).  According to the Post, the PLA Central Theatre Command's main hospital said earlier this month that it had approved the embedded deployment of DeepSeek's R1-70B LLM, stating that it could offer treatment plan recommendations to assist physicians.

Market Dynamics

Drivers

The modernization of defence infrastructure – AI tools can facilitate efficient logistics functions, allow predictive maintenance of military vehicles and equipment, and balance resources, which maximizes the uptime and minimizes the life cycle costs. Furthermore, the digital transformation and modernization of most military forces globally involve adopting AIs in the command-and-control structure, surveillance systems, and communication infrastructures on the battlefield. This modernization will enable better and quicker decision-making involving the use of real-time data and superior analytics. Additionally, the simulators in AI technologies provide a very real battle situation so that the soldiers can train to hone their skills in strategy and tactics with minimal physical tools. These virtual simulated training spaces also allow a customizable learning and performance tracking process, and increase preparedness. Moreover, AI promotes force multiplication, in this case, fewer people are needed to carry out complex and large-scale tasks facilitated by automation and smart systems. Due to the fact that military organizations want to achieve more with less resources, AI provides scalable solutions to sustain combat readiness. All these dynamics are contributing to the increased desire by defence establishments to embrace AI technologies to drive performance, increase readiness and stay ahead technologically in more complex military environments.

Restraints

Financial and technical limitations – The major limitation is the fact that the development, implementation as well as the maintenance of AI systems are quite expensive. Military grade AI also necessitates significant investment in software, hardware and the infrastructure to maintain such technologies, and this investment adds an extra burden to the defence budget and may conflict with other areas of interest. Also, the experienced team in the military organizations with the experience of operating, managing, and innovating with AI systems is usually lacking. This skills shortage prevents successful integration of AI in the current workflow. Another major challenge is integration, as the bulk of the armed forces operate under legacy platforms and infrastructure, which is not compatible with the new AI technologies. Upgrading or retrofitting these systems provide obstacles since this is complex and also costly. Lastly, resistance to change within the organization and hierarchical command chain may be slowing the rate of adaptation to AI.

Opportunities

Increasingly volatile geopolitical landscape – the increasingly active geopolitical landscape and the advent of the AI arms race between the great powers such as the United States, China, and Russia drives the market of AI in military. These countries are also highly invested in AI to have a tactical advantage in terms of military capabilities over other countries. The other critical aspect is that AI and the associated technologies, including robotics, sensors and big data analytics are quickly advancing and are opening new opportunities to be used in military applications. These technological developments are forcing the defence organizations to consider the use of AI-powered systems in order to boost Pentagon efficiency and situation understanding. The use of AI-powered systems is necessary to defend sensitive military information and infrastructure via the real-time identification of threats, and automated responses to cyberattacks. Moreover, a new form of warfare, characterized by asymmetric threats, hybrid warfare, and terrorism, creates a need to respond quicker, smarter, and more agile on defence, and AI can adequately address this. AI is also being adopted faster in the defence-related scenarios, with the governments and technology companies and startups collaborating to co-develop the latest technologies. The tendency is boosted by more and more countries having raised defence budgets due to increased security concerns.

Segment Analysis

Regional segmentation analysis

The regions analyzed for the market include North America, Europe, South America, Asia Pacific, the Middle East, and Africa. North America emerged as the most significant global AI in military market, with a 39% market revenue share in 2024.

North America, specifically the United States is dominating the AI military market across the globe because of high technological capabilities, high military spending and government willingness to embrace innovations. U.S. Department of Defence (DoD) is among the biggest AI research and development investors, hence, paving way to the development of various AI-based military applications like autonomous vehicles, surveillance systems, cyber security, and command and control platforms. This leadership is backed by a well-established ecosystem of defence contractors, tech giants and startups that work extensively with the military to come up with the advanced AI solutions that suit the defence requirements. The fact that North America possesses a well-developed system to test and implement AI and has access to huge amounts of quality data, high-end computing capabilities and a talented workforce only contributes to its dominance. Besides, the geopolitical agenda of North American nations focuses on technological leadership over their potential aggressors, which leads to continuous funding in the modernization of defence on the AI-based system.

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Component Segment Analysis

The component segment is divided into hardware, software and services. The hardware segment dominated the market, with a market share of around 38% in 2024. The hardware gets the largest market share in the global AI military industry as it forms the backbone of AI application and systems to be useful in military activities. Contrary to software allowing hardware to be interchangeable and with sufficient capabilities, the AI hardware consists of those more specific elements including special processors, sensors, cameras, autonomous drones, and unmanned vehicles that practically carry out those tasks with AI in the battlefield. Moreover, the development of autonomous platforms such as flying drones, self-driving cars, and ground robots is more dependent on advanced hardware to navigate, monitor, and attack targets without any human inputs. The defence sector also concentrates on hardware related to increasing cyber security, like: hard processors, and tamper proof parts to provide protection of sensitive data.

• Anthropic unveiled Claude Gov, a product created especially for the intelligence and defence sectors of the United States.  The AI models are taught to better analyse classified information and are subject to less restrictions for use by the government.  According to the business, only federal agencies that handle secret material will have access to the models it is announcing, which "are already deployed by agencies at the highest level of U.S. national security."   Claude Gov models are especially made to meet government requirements like threat assessment and intelligence analysis.  Additionally, the models had particular requirements for national security work, even though the business claimed that they "underwent the same rigorous safety testing as all of our Claude models."

Application Segment Analysis

The application segment is divided surveillance and reconnaissance, autonomous weapon systems, cybersecurity, command and control systems and training and simulation. The surveillance and reconnaissance segment dominated the market, with a market share of around 32% in 2024. Militaries have been able to use AI-based functions to collect, analyse, and interpret large quantities of information transmitted by a variety of sources like satellites, drones, radar, and ground sensors to provide real-time knowledge of the situation and intelligence. The growth in complexity of current conflicts such as asymmetric warfare and cyber threats further boosts the need of sophisticated surveillance systems that will be able to work persistently and in many different spheres. The world governments are rampantly turning to investing in AI powered reconnaissance tools as this keeps them ahead of the game and enhances their preparedness in defence. Moreover, there is a tendency to use surveillance apps as force multipliers that can better coordinate the activities of various divisions of the army and allied organizations.

• Leading artificial intelligence (AI) company Scale AI has been given a prototype contract by the US Department of Defence (DoD).  The DoD's flagship effort to incorporate AI into military strategy and operations, "Thunderforge," is the subject of the contract.  The action is a component of the Pentagon's broader strategy to enhance its AI capabilities, which aims to expedite decision-making in combat.  The intention is to enable the United States military to "anticipate and respond to threats with speed and precision."

Platform Segment Analysis

The platform segment is divided into aerial systems, ground systems, naval systems and space systems. The aerial systems segment dominated the market, with a market share of around 34% in 2024. Aerial systems dominate the global AI military sector, since they offer strategic benefits in terms of surveillance, reconnaissance, combat and logistics. A key player in the recent past in warfare is the Unmanned Aerial Vehicles (UAVs) popularly referred to as drones which have become a prominent feature in the warfare arena through its capacity to move freely without a human operator, covering mass areas and undertaking various missions with negligible exposure to human life. The integration of AI improves these aerial platforms by making them autonomous, better at target recognition, and with the ability to make real-time decisions which can make a vast difference in terms of efficiency and accuracy of missions. Also, the AI-enhanced airborne systems facilitate the precision strike because the targets are accurately detected and attacked minimizing the collateral damage and raising the chances of successful missions. The flexibility of the aerial systems also applies to the field of logistics where the AI-powered drones are capable of delivering provisions to distant or hazardous locations in a rapid and secure manner. The absolute superiority of airborne systems is also supported with the constantly developed innovations of lightweight sensors, high resolution cameras, and communicative systems which improve the capacities of the aerial systems.

• "AI Fight Club" is a new effort from Lockheed Martin that will allow businesses to test their AI algorithms for military usage in a virtual battlefield. Its goal is to establish a digital testing ground for artificial intelligence (AI) systems in space, air, land, and sea operations.  During an AI conference organised by the Special Competitive Studies Project, a nonprofit organisation that focusses on American competitiveness in cutting-edge technology, Clark announced the effort.  The project coincides with Pentagon efforts to hasten the deployment of AI as military rivals, especially China, make significant investments in AI-powered fighting capabilities and autonomous weapons systems.

End-user Segment Analysis

The end-user segment is divided defence forces, intelligence agencies and homeland security. The defence forces settings segment dominated the market, with a share of around 46% in 2024. Defence forces are the leading category of end users in the AI military market worldwide, given that they were the main stakeholders of implementing and using AI capabilities in an extensive set of military operations. The army, navy, and air forces are incorporating AI to a larger extent as a way of increasing combat readiness, efficiency in operating and strategic capability. Defence forces are motivated to modernize armed forces due to the emergence and advancement of threats and diversity of geopolitical conditions. AI allows such forces to enable the processing of large volumes of battlefield data, enhance decision-making velocity and automate vital processes, including surveillance, target tracking, and logistics operations. The defence forces are also enjoying the advantages of AI-enabled simulation and training that equip soldiers to tackle various combat scenarios with greater proficiency and with more realism. Moreover, the funding and strategic plans of governments give most of the investment to defence institutions, so they become the main consumers and creators of AI-based systems as per military demands.

Some of the Key Market Players

• Anduril Industries
• BAE Systems
• Boeing
• C3.ai
• General Dynamics
• IBM
• Leonardo S.p.A.
• Lockheed Martin
• Northrop Grumman
• Palantir Technologies
• Raytheon Technologies
• Thales Group

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