What looks like a video game, works like a flashlight, and explodes targets with a "bang"?

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Video still: U.S. Navy.

Answer: the U.S. Navy's new Laser Weapon System, or "LaWS," a $40 million prototype laser gun that recently deployed for at-sea trials off the coast of Iran.

In multiple demonstrations, filmed by the Navy and posted on YouTube, this laser gun is first shown exploding ordnance aboard a towed barge and a fast-moving speedboat.

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Video still: U.S. Navy.

For an encore, the Navy launched -- then blasted -- one of its own ScanEagle drones, showing LaWS can serve as an anti-aircraft laser gun as well.

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Video still: U.S. Navy.

All this was accomplished from the control center of Afloat Forward Staging Base USS Ponce (a refurbished amphibious transport dock), by an officer using what appears to be a video game controller operating a laser gun not much bigger than your average CIWS Phalanx Gatling gun.

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Video still: U.S. Navy.

A quick review
Together, these elements form LaWS, which the Pentagon said cost only $40 million to develop -- and which could reinvent the way the Navy fights battles in the future. With silent, invisible, unjammable laser beams, LaWS destroys targets in a (literal) flash, killing targets with pure energy and light. At a cost of just $0.59 per shot, LaWS is 2 million times cheaper than a $1.5 million Tomahawk missile.

It is also, as shown in the video, surprisingly effective for a technology still in its infancy. According to website BreakingDefense, the actual shooting end of LaWS is just six industrial welding lasers "strapped together" and focusing 33 kilowatts of energy at the target. It gets the job done already. Future iterations would aim to ramp up rapidly to 60 kilowatts, then 100, and then perhaps even a full megawatt of power -- enough to destroy a fast-moving ballistic missile from miles away.

What it means to investors
Encouraged by early success, the Navy is planning to equip warships with "cost-effective, combat-ready laser prototypes," says the Office of Naval Research as early as the 2020s -- which should sound a wake-up call for investors in the defense industry. Things are changing fast.

Here at The Motley Fool, we love reading about cutting-edge military tech -- but what we really enjoy is translating defense news into cold, hard profits in our portfolios. With that end in mind, let's take a quick look at what this news could mean for defense investors.

Size doesn't matter...
Cost and space savings on laser gun-equipped ships will be enormous -- but the boats won't have to be. This is because laser guns eliminate the need for hulking missile cruisers and destroyers stacked to the rafters with artillery shells.

In today's Navy, once a warship runs out of "bullets," it is combat-ineffective. But in a laser gun-armed vessel, the ship's engine is the "magazine," creating near-free "bullets" for the laser gun to fire.

In future years, investors might want to supplement investments in traditional munitions makers such as General Dynamics with those in engine makers including Rolls-Royce (which powers the Zumwalt-class missile destroyer) or United Technologies (which packs an amazing amount of power into a small engine aboard the F-35 fighter jet).

...efficiency and scale do
IPG Photonics 
and Rofin-Sinar Technologies are also worth keeping your eyes on. Among the world's leading specialists in laser tech, they are logical places for the Navy to look as it upgrades its laser guns.

And don't forget the large, integrated defense contractors like Lockheed Martin, which recently won a Defense Advanced Research Projects Agency contract to improve laser guns' accuracy. Whether by work in-house or through acquisitions of smaller players winning Pentagon contracts, they're certain to claim their pieces of the laser gun pie.

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Lockheed Martin played a leading role in the U.S. Air Force's airborne laser program. Photo source: Wikimedia Commons.

Rich Smith has no position in any stocks mentioned, but The Motley Fool recommends IPG Photonics and Rofin-Sinar Technologies and owns shares of IPG Photonics. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.