Why the Army Just Handed Aerovironment a Half Billion Dollar Laser Deal

 Good morning. This is Dylan Jovine with Behind the Markets. Happy Tuesday. Today is Tuesday, August 11th, and today, I'd like to talk about the military. This is something I haven't really talked about in a while. But there's so many exciting things that are happening in the military in terms of the weaponry that we're using and a lot of lessons that we're learning from the Iran war, the Ukraine war, etc., etc. And ironically, a lot of these lessons are things that we've talked about here for years. We made kind of our name and our reputation on geopolitics and defense companies, as you well know, those of you who've been on this. But, you know what got me to wanna talk about this today was one of the companies in our model portfolio, AeroVironment, that we recommended at much lower prices, just got a basically almost a $500 million contract, almost half a billion dollar contract to come up with counter-drone lasers. So the US Army is buying at least $400 million worth of counter-drone lasers from aerovironment. And you know, basically what the Army is betting on, and you could see this happening with war, is that aerovironment's Locust system, which basically tracks, identifies, and helps human operators destroy small to medium-sized drones with a high-energy laser, the Army's betting on that this will be a better solution to dealing with a mass of incoming drones than other solutions. And this is something else that I've talked about. There's so much stuff happening here. By the way, this is the Pentagon's first ever contract for a directed energy counter-drone system. And I don't know, for those of you who've been around for a while, you might remember a couple years back, I was saying lasers are going to be the thing. And I used the example, and I've always used the example. Imagine that you're on a Navy ship, and you're trying to cross the South China Sea, and China basically says, "That's it. We're taking over all the AI chips and semiconductors." So we send a US Navy ship there. Now, if you're China, what you do is you wanna send 20,000 drones automatically, right? The idea is to get us to exhaust the ammunition that we have to shoot those drones down, right? So basically, we're moving to a system here where lasers can really knock them down a lot faster. Also, we're moving to a place where humans cannot react fast enough. So you're gonna see this continued push for AI systems to speed up the kill chain, and this is very, very important. Just think of Iran. Imagine Iran sends a bunch of drones over. Now, we've been shooting them down with $5 million missiles, you know, and they come in really, really quickly. Now, if we could actually automatically knock them down with lasers, number one, number two, not have necessarily humans in the process of that kill chain, basically have AI identify target and kill all incoming using lasers, not only is it faster and more efficient, it is also cheaper. Lasers are dramatically cheaper. We're talking about like a dollar per shot, less than a dollar per shot really, versus, you know, millions of dollars per shot when you're shooting down some of these drones with these expensive weapon system. So you're really starting to see these kinds of things really take off and actually be adopted, things that we have talked about here for many years. Now, think about the complexity that's involved here. We have an army system, they have a locust system or any system that is actually on the front lines in the Middle East, and what it's doing is it's defending drones. Now, there's a lot going on. They're actually trying to track incoming drones, and they're trying to identify them, target them, beep beep beep beep beep beep beep and then shoot them down, kill them, basically. There's a lot of communication going on between that system and home base. A lot of stuff happening with satellites. It's got to communicate with home base, it's got to communicate with Washington, it's got to communicate with other operators on the field. All that stuff happens through satellites. Now, there is a big opportunity in companies right now that are actually speeding up the transmission of that data because remember, success in warfare is based on speed. So basically, if you are a drone operator here, if you're running a drone battery, and there's 10 other people, Americans, operating similar batteries in the southern part of Iran, for example, just to make it simple, they all have to communicate with each other, they all have to communicate with base, and they all have to probably communicate with back home. So there's a lot of data that has to flow in the air, and there's a lot of exciting companies, one in particular that we've been focusing on that we've been recommending that's private, basically that helps the transmission speed, helps speed up the ability for all of these to talk with each other through satellites at home base. So compression, data compression. It's not glamorous. It doesn't go bang, but it certainly makes the whole thing work better. And remember, as I've said it a million times here, success in warfare is based on speed. So what you're trying to do when you study the history of warfare is that you see the armies that have had the fastest kill chain, the fastest ability to identify the enemy, target the enemy, and then kill the enemy or destroy the enemy is always the army that wins, period. So communication is even more important. And I'll leave you off with this last piece that I've also talked about before. Remember, a lot of people think Germany, Nazi Germany, overran France because they had more tanks. That's actually not true. As a matter of fact, France had more tanks, and they actually had better tanks. But what the Nazis did is they added two-way radios to their tanks, so they were actually able to communicate faster and better. So it's very, very important. So tank A would be able to call tank B and say, "We have an enemy over here." Tank C would respond to that too, and they'd all go in there, swarm on the opponent. That is all about transmission speed of data. You're moving data. So this is very, very important, which is why we're very, very excited about the company that we talked about in Hidden Market Profits, private company that's helping America do just that, the US Army. Anyway, that's all I have for you today. Have a wonderful day. I will see you tomorrow.