From Ammunition to Algorithms: Are Drones Already Obsolete?

For the past several years, commentators have marveled at a new asymmetry in warfare.

A drone costing a few thousand dollars can destroy a tank worth millions of dollars. A loitering munition assembled from commercial parts can disable equipment worth a thousand times its cost.

For centuries, military advantage flowed from industrial mass—steel, explosives, fuel, and manufacturing scale. Fast moving offensive weapons tanks—and helicopters—dominated the modern battlefield. Then drones seemed to shift the edge toward relatively low technology, pinning attackers in place.

The lesson seemed obvious. Movement on the battlefield would be stymied. In Ukraine, the war turned into a WWI-type slaughter between the trenches. Missiles still worked, so the Russians would turn Kiev into Dresden. Future drone strategy was projected to favor swarms of relatively cheap weapons overwhelming expensive interceptors.

That lesson is already aging, a new asymmetry already is emerging.

Directed-energy weapons, particularly high-energy lasers, already deployed by the United States and Israel promise to invert the cost equation. Once deployed, a laser shot costs little more than the few dollars of electricity that powers it. There is no interceptor to replenish, no magazine to exhaust. As long as power and cooling are available, the system can continue to engage.

If a $10,000 drone can be neutralized with a few dollars of energy, or a swarm of even cheaper drones, the economics shift dramatically. But the inversion does not come from energy alone.

It comes from information.

A drone is a material object. It must be manufactured, transported, fueled, and launched. Its destructive power is tied to its mass and payload. Even with autonomy, it remains bound by physical constraints.

A laser defense system is increasingly an information system. The laser itself is hardware. The decisive challenge is detection and targeting: finding small objects against clutter, distinguishing friend from foe, tracking erratic motion, predicting trajectories, and allocating engagement priority across multiple threats. This requires computation at a level made possible only by artificial intelligence (AI). The constraint shifts from the logistics of ammunition to the speed of processing.

The more defense becomes a problem of sensing and targeting, the more it benefits from the rapid advance of AI. The more completely a technology sits in the realm of information, the faster it improves. Algorithms iterate. Models retrain. Software updates propagate. Engagement cycles shorten.

Hardware evolves incrementally. The software compounds exponentially.

Defense becomes less about stockpiling munitions and more about processing information, while less about material accumulation and more about algorithmic refinement.

Israel offers a vivid illustration. Its Iron Beam laser system is being integrated into the country’s layered air defenses to counter rockets, mortars, and drones — the very threats that have strained interceptor economics. Instead of expending costly missiles on low-end projectiles, the laser can neutralize many of them at minimal marginal cost.

This does not eliminate the need for interceptors against higher-end threats. But it shifts the lower tiers of conflict toward an information problem: find, classify, track, and engage quickly enough.

Directed energy is not magic. Atmospheric conditions matter. Power generation and thermal management remain engineering challenges. Today, tough-skinned, high-speed ballistic threats require different solutions. But time is on the technology’s side.

Is there an investment angle to all this? In the broad sense, high-tech nations—including Israel—benefit, reducing the threat to investors in those countries.

What about investors in the defense sector itself?

For those investors, the question is not whether lasers replace every missile. They will not. The question is whether a meaningful portion of aerial threats can be neutralized at near-zero marginal cost by systems that improve primarily through software and sensing.

As cost curves shift, strategy—and procurement—follow.

Major defense integrators such as Lockheed Martin (NYSE: LMT) and Northrop Grumman (NYSE: NOC) are incorporating directed energy into broader architectures. Israel’s Rafael is advancing laser integration within its air-defense stack. Procurement patterns will evolve as economics continue to shift toward energy plus information.

At Gilder’s Technology Report, we focus on technologies that migrate advantage from the material to the informational—from ammunition to algorithms. Directed energy has our attention.