The Impact of A.I. on National Security Systems: Insights into the Future of Defense Stocks

The Role of Artificial Intelligence in Defense and Geopolitical Conflicts

Developing AI Applications for National Security

Artificial intelligence (AI) is revolutionizing the defense industry and shaping the way geopolitical conflicts are fought. The Pentagon has allocated a significant budget of $1.8 billion for AI spending in the fiscal year 2024. The number of AI and machine-learning patents in defense has also skyrocketed. The Department of Defense began considering AI technology in 2014, focusing on decision-making support software (autonomy at rest) and AI-supported systems that control unmanned vehicles (autonomy in motion). Implementing AI in defense helps automate dangerous tasks and reduces the risk of human casualties.

AI Defense Technologies

Data plays a crucial role in the development of AI technology in the defense sector. Companies like Lockheed Martin and General Dynamics are actively developing automated target recognition capabilities, which act as "eyes" on the battlefield to identify targets. AI is also used to compile and analyze data, simplifying on-the-ground analysis and supplementing decision-making. However, it's important to note that AI is a supplementary tool rather than a substitute for human decision-making. The Department of Defense policy states that human judgment should prevail in cases involving potential lethal force.

Surveillance and Cyber Warfare

AI technology is not limited to battlefields. More than 75 countries, including the US and China, are leveraging AI for surveillance. However, there are concerns about the spread of AI technology linked to violations. In the realm of cyber warfare, AI is increasingly essential. Automatic systems can quickly block and fight cyber attacks, surpassing human capabilities. Defense companies like BAE Systems, Northrop Grumman, and Palantir are leading the way in developing AI applications in cybersecurity.

Investment Outlook and Future Perspectives

While AI shows promise in defense, the implementation remains limited and in the experimental phase. Investing in defense stocks solely based on AI expectations may not guarantee significant returns due to declining margins from fixed-price defense contracts. However, the US' emphasis on modernization provides a catalyst for AI investment. Staying one step ahead of near-peer adversaries necessitates investing in technologies like artificial intelligence. With AI's potential to automate tasks and assist decision-making, the future of the battlefield lies in the advancements of AI technology.

Conclusion: The Employee Retention Credit and its Impact on New Businesses

The scrutiny surrounding the employee retention credit (ERC) has significant implications for new businesses navigating the complex tax landscape. While the ERC was initially intended to provide support to small businesses during the pandemic, the rise of wrongful claims and the emergence of "ERC mills" have raised concerns about the legitimacy of the credit.

For new businesses, understanding and properly claiming the ERC is crucial. While the credit can provide much-needed financial relief, wrongfully claiming it can result in serious consequences, including owing a significant amount back to the government.

The increased investigation and audit efforts by the IRS highlight the need for accurate guidance and support for small businesses and tax professionals alike. Clear and comprehensive eligibility criteria are essential to avoid potential pitfalls and to ensure that businesses qualify for the credit.

Furthermore, the backlog in processing amended returns by the IRS creates uncertainty and potential risks for small businesses. The potential for an earlier end date for amending returns could leave new businesses with limited time to rectify any mistakes or to determine their eligibility for the ERC.

In conclusion, new businesses must approach the employee retention credit with caution. Seeking guidance from tax professionals and staying updated on the latest regulations and requirements is essential to avoid wrongful claims and potential penalties. By doing so, new businesses can navigate the complexities of the ERC and maximize their chances of receiving the credit they are rightfully eligible for.

Article First Published at: https://www.cnbc.com/2023/07/30/ai-is-changing-national-security-systems-heres-whats-ahead-for-defense-stocks.html