Military drone manufacturer AeroVironment (AVAV +4.19%) shares gained 3.8% through 11 a.m. ET Tuesday, after the company announced a new artificial intelligence (AI) autonomy kit available for use on its unmanned aerial vehicles.
You read that right: AeroVironment is now an artificial intelligence stock.
NASDAQ: AVAV
Key Data Points
AI drones for America -- and Ukraine
Designed to "increase effectiveness of autonomous systems and reduce operator burdens," AeroVironment's new Autonomy Retrofit Kit (ARK) running AVACORE software is offered to upgrade existing Group 1+ (i.e., small) UAVs such as Puma. The company says its upgrade will permit drones to operate on full autonomous mode, without guidance from their ground controllers, utilizing onboard vision software to find, track, and classify targets.
And granted, this all does sound a bit Terminator-y. But in "communications-contested environments" where enemy soldiers are blasting drones with jamming equipment, it might be the only way to ensure these drones function at all.
What does it mean for AeroVironment?
And let's be blunt: An upgrade of this sort is sorely needed. As The Wall Street Journal reported earlier this month, U.S-made drones operating in Ukraine have quickly turned into "victims of Russia's electronic warfare." Citing comments from Ukrainian soldiers, government agencies, and drone manufacturers themselves, U.S.-made drones are described as "expensive, glitchy and hard to repair."
One out of three of those adjectives might be forgivable -- but not all three. Worst for AeroVironment investors, their company was identified by name in the WSJ article, which described AeroVironment Switchblade drones as having "challenges" overcoming Russian electronic warfare. Clearly, this was a problem AeroVironment needed to solve, and fast.
Since the war in Ukraine began, AeroVironment's quarterly drone sales have more than doubled, to $186 million last quarter. That sales growth holds the potential to turn AeroVironment profitable again, if it can maintain momentum. Retrofitting existing drones with AI to make them more survivable, and building AI into any new drones the company invents, is probably the only way to keep AeroVironment relevant as a military contractor in this brave new world of electronic warfare.
