2025 Global AI Competition and Defense New Frontier Research Report (English)

PwC This publication has been developed in collaboration between Strategy&,PwC's global strategy consulting business, alongside PwC industry andfunction experts. Together, we transform organizations by developing At PwC, our purpose is to build trust in society and solve importantproblems. We’re a network of firms in 156 countries with over 295,000people who are committed to delivering quality in assurance, advisoryand tax services. Find out more and tell us what matters to you by PwC refers to the PwC network and/or one or more of its member firms,each of which is a separate legal entity. www.pwc.com Contacts GermanyLudwig BillerDirector, Strategy& Germany--- 'U *eUPaU SchUùdeUPartner and Public SectorEurope Lead,Strategy& Germany ---germar.schroeder@pwc.com 'U 1ils )ùUsteUPartner, Strategy& Germany Danny RieneckerManager, PwC Germany--- About the authors Ludwig Billeris a Director at Strategy& Germany, based in Munich. He is a member of thepXblic sectRU pUactice and adYises natiRnal and sXpUanatiRnal deIense RUganisatiRns and 1A72aUPed IRUces +is pUiPaUy IRcXs lies Rn RUgani]atiRnal stUategy and laUge-scale tUansIRUPatiRns Danny Rieneckeris a Manager in the Public Sector Consulting team at PwC Germany, based in)UanNIXUt :ith a bacNgURXnd as an aeURspace engineeU and  yeaUs RI seUYice in the *eUPanAUPed )RUces, his IRcXs lies especially Rn technical-lRgistical pURMects +e deplRys his pURIRXnd Dr. Nils Försteris a Partner at Strategy& Germany based in Frankfurt am Main and leads the publicsector defense platform in Germany. He specializes in operational excellence and focuses ondigital transformations as well as large procurement programs. He serves national and international Dr. Germar Schröderis a Partner with Strategy& Germany based in Frankfurt am Main, leadsStrategy& consulting in public sector in Europe and PwC’s defense growth initiatives in Germany.+is pURMects IRcXs Rn I7 stUategy, innRYatiRn, clRXd, RUgani]atiRn, laUge scale pURgUaPs andRpeUatiRnal e[cellence specifically in deIense and secXUity, in natiRnal as well as inteUnatiRnal 7he aXthRUs wRXld liNe tR thanN 0RUit] %eUgdRlt, 3hil %ùttcheU, )UanN 'đUUbecN, &andas )ili],.eUin +aUtPann, SYenMa .iUsch, Sissel /XcNa, and -enniIeU Anne 3Uiebe IRU theiU wRUN whR haYe 'isclaiPeU 7his UepRUt is nRt an RIficial pXblicatiRn RI the 0S& 7he cRntents RI this papeU dR nRtpXUpRUt tR Ueġect the RpiniRns RU Yiews RI the 0S& and is Peant tR pURYide inpXt tR and stiPXlate EXECUTIVE SUMMARY Artificial intelligence (AI) has become a defining pillar of modern militaryadvancements that will revolutionize strategic decision-making, sur-veillance, autonomous systems, and logistics. The unprecedentedcapabilities AI offers represent a seismic shift in how nations approachdefense. Future battlefields will be shaped by AI-driven real-time data Looking ahead, the most transformative impacts of AI are anticipated in three key areas in theshort term: predictive decision-making, enhancing the capabilities of autonomous systems,and dynamic resource management. Within these domains, AI promises to revolutionize Early adopters, such as the United States and China, who are successfully integrating AI intotheir defense strategies, are already gaining a significant technological and organizationaledge and are expected to dominate the future AI in defense landscape. In contrast, Germany As AI will revolutionize the defense field, it is essential for the Western alliance to compre-hensively address the core ethical and legal implications, as well as the inherent targetconflicts and risks, that are associated with its development. Only by ensuring that AI isresponsibly deployed in the defense field, fully in line with central democratic principles andrespect for human rights, can global legitimacy be ensured and trust developed. Ethical Germany has the potential to take a leading role in this collaborative development ofresponsible AI in the defense field, building on its strong reputation for ethical governanceand multilateralism. To fill this role, Germany needs to develop a comprehensive andunified national AI strategy that aligns with its industrial and civilian AI ecosystems, in closecollaboration with European and NATO partners. The success of this strategy will depend INTRODUCTION Artificial intelligence is evolving and making a difference across the world in every industry.Its impact on defense is no less transformative. Unlike previous technological revolutions, AIis not just a tool, but an enabler of entirely new paradigms. Its applications extend beyond This report explores the transformative potential of AI in defense, examining its impact onmilitary capabilities and evaluating the emerging race for AI leadership. It highlights themultifaceted applications of AI, from predictive analytics and autonomous systems to cyber It also focuses on the essential ethical and operational challenges that accom