The rapid advance of artificial intelligence (AI) has revolutionized various industries, from healthcare to finance. However, one sector where AI’s impact is particularly profound is warfare. As AI systems become increasingly sophisticated, they are poised to transform the very nature of armed conflict, raising both the potential rewards and risks for investors.
On the one hand, AI offers immense opportunities for military strategists and technology companies. AI-powered systems can analyze vast amounts of data, optimize decision-making, and automate complex tasks. This could give militaries a significant edge over adversaries. This, in turn, could lead to increased efficiency, reduced casualties, and enhanced situational awareness.
AI is also enabling the development of autonomous weaponry, such as drones and self-driving vehicles, that can engage in combat without human intervention. This raises concerns about the ethical implications of autonomous warfare, but it also opens up new avenues for investment in AI-related defense technologies.
2024 begins with two ongoing conflicts, regional but with possible repercussions on a global scale – just think of the volatility of raw material prices. And the way of waging war, a multi-billion dollar industry, is starting to incorporate a new element: artificial intelligence. Science fiction? Certainly not, according to several experts , who “on the war of the future” analyze what, according to the evidence, are the seven domains towards which the way of fighting is being directed.
At the basis of everything is the concept of “wetwar”, a derivation of wetware, “that is, the union of our brain with the software”. An idea that has already carved out a space for itself in the world of research and startups from science fiction films – an Australian project, for example, has created mini-brains in the laboratory with neurons connected to machines – and which is leading to “cognitive war, a war of intellect and technology that develops through different possible domains of warfare”.
This is the starting point, which also justifies the multimillion-dollar investments that governments and businesses are making in these areas of future warfare. But what are the trends in detail? One is “multi-domain warfare”, that is, military planning that must extend to physical space and the intricate complexity of cyberspace. For example, the technologies already adopted by NATO to integrate platforms such as drones, and cyber and radar systems that make defense decisions in the fastest and most coordinated way possible.
Beyond that, there exists what is termed “algorithmic warfare”, i.e. cyber warfare operations guided and enhanced by algorithms and artificial intelligence. In the annals of this realm of cyber conflict, one notable pioneer was Google, with the Maven project developed in collaboration with the Pentagon. Despite the tech giant’s withdrawal, US defense officials have persistently advanced this innovative approach to warfare.
However, it’s not exclusive to Washington, as other players are actively looking at it. This encompasses the utilization of algorithms for automated analysis of images and videos gathered by drones. This, in turn, enables the identification of enemy targets.
According to an analysis by the Moscow Times , the Russian government, has allocated over 30 billion rubles – approximately $330 million – exclusively for archiving surveillance videos. Moscow alone boasts more than 200,000 city cameras integrated into the centralized system.
Yet another frontier lies in the realm of “tech-enabled information warfare,” a landscape that has exposed us to alarming phenomena such as deepfakes—deceptive videos or audio crafted by AI algorithms to emulate authentic content, seamlessly mimicking the attributes of well-known individuals.
Once again, Russia takes a leading role, leveraging the creation of content designed to foment discord and polarize public debates in the West. This activity has given rise to what experts label the “fifth domain”. This is characterized by hyper warfare – rapid and intricate maneuvers unfolding in the blink of an eye. One example is the swift propagation of a computer virus, infecting hundreds of thousands of systems within a matter of days.
Lastly, we encounter two of the most disconcerting domains. The first is the “cine-kinetic operations,” denoting cyber attacks with immediate physical consequences. Consider, for instance, a building whose defenses are manipulated by hackers. This would pave the way for enemy military forces to physically breach it shortly after.
Such systems have already been deployed in critical infrastructures, exemplified by the BlackCat ransomware, operational since January 2022 and targeting at least 17 ports across Germany, Belgium, and the Netherlands. The ransom demands associated with these attacks have reached a staggering $14 million.
Moving on to the seventh domain, we meet the concept of “automated warfare”. This is a future where the human element could be minimized, allowing machines to assume control.
Imagine weapons managed by AI software dictating where, how, and when to strike. The most powerful countries in the world are experimenting with this technology, raising the crucial question: how much are we willing to sacrifice for security? The ethical debate transcends philosophy; it is a palpable reality.
Despite nations making substantial investments in deploying artificial intelligence for their defense systems, the potential benefits for common investors remain unclear.
Traditionally, during times of war, investors tend to shift towards safe-haven assets like gold. They can also capitalize on the increased demand for commodities, driven by the heightened volatility resulting from conflicts.
Analysts at IG forecast that volatility will persist at elevated levels. If other countries, such as in the Ukraine and Gaza conflicts, become involved, market impacts will rise. This may lead to widespread risk aversion and a prolonged sentiment of risk-off in the markets.
The destabilization in the Middle East exerts upward pressure on oil prices, prompting investors to turn to secure assets such as bonds, USD, CHF, JPY, and gold. However, IG analysts express confidence that a repeat of the 1973 oil embargo following the Yom Kippur war is unlikely. Notably, the influence of the Organization of the Petroleum Exporting Countries (OPEC) on global production has substantially diminished since then. Additionally, ongoing talks between Saudi Arabia and Israel aimed at normalizing relations suggest a different landscape from that in 1973.
Anyway, if you’d like to invest in AI-related stocks, here‘s our guide on trends for 2024.
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