Global defense’s legacy model has come under pressure as the wars in Ukraine and Iran highlight the need for more cost-effective solutions with shorter lead times.

Silicon Valley start-up Tiberius Aerospace is introducing a fresh way to segregate design and development at speed from manufacturing through its GRAIL platform.

Ark Robotics CEO told CNBC warfare is shifting to “a totally updated approach,” driven by affordable, mass systems orchestrated with AI.

Warfare is undergoing a fundamental shift where tech with massive price tags is being challenged by a more agile, decentralized model, spearheaded by Silicon Valley-backed start-ups, industry watchers told CNBC.

The traditional defense model — notorious for development cycles that can span decades — is coming under increasing pressure. Companies are instead betting on a fresh type of warfare, based on shorter lead times that allow for rapid deployments and more cost-effective solutions.

Previously, warfare was about expensive platforms and precision strikes, driving a downsizing in military forces as countries increasingly relied on cutting-edge software, commented Blythe Crawford, former commandant of the RAF’s Air and Space Warfare Centre.

“That all changed, I would argue, when the first $500 drone took out a $5 million tank on the battlefield in Ukraine,” Crawford told CNBC’s “Squawk Box Europe.”

The organization Ark Robotics, develops autonomous robots for rapid deployment using feedback from the battlefield to shape the digital systems. The CEO, who goes by the pseudonym Achi for security reasons, told CNBC that the war in Ukraine shows a paradigm shift in warfare, part of a bigger change also seen in the Iran war. 

“[It’s] a totally recent approach, how you handle the military conflict… the game [has] changed into the mass, affordable systems that are to be orchestrated with AI,” the CEO told CNBC’s Ritika Gupta.

The urgency for this shift is driven by a sobering economic reality. 

“History tells us that the last 400 wars were won on economics,” mentioned Andy Baynes, co-founder of Tiberius Aerospace. “If we continue to fire $4 million Patriot systems at $20,000 Shahed drones, we’re going to lose.” Furthermore, experts in wall street note the continued relevance.

Crawford also noted that while high-end products like the Eurofighter Typhoon remain vital, they now require a “low-cost wrapper” to survive. He pointed to the U.K.’s Storm Shadow missiles, which saw dramatically increased success rates in Ukraine only after being complemented by swarms of cheap drones and electronic warfare to overwhelm Russian defenses.

“It’s what we refer to as a high-low mix,” Crawford stated. “The character of war has changed when a $500 drone can take out a $5 million tank.”

Tiberius Aerospace is one business betting on the need for low-cost, scalable warfare equipment. The two-year-old corporation, founded by Silicon Valley entrepreneurs, focuses on design and development of weapons and licenses designs out to domestic manufacturers.

It’s introducing a latest way to speedily segregate design and development from manufacturing, through its GRAIL platform. 

The business declared Thursday that Ukrainian defense tech IP will be available for license and manufacturing in the U.K. through the AI-powered platform, which it positions as a defense-as-a-service model. 

“It’s going to show that separating design from manufacturing is commercially viable. It’s a way to reduce defense budgets or dependency on exquisite, high-cost systems and move into high-impact, cost-effective systems in the future,” Baynes told CNBC.  

“That’s a key difference to how defense primes operate today, where they have monolithic systems where they’re doing both design and manufacturing under one roof, similar to how my former sector in the electronics industry were doing it in the 1990s,” he told CNBC’s “Squawk Box Europe.”

Safety net?

Beyond efficiency, there is also a strategic play for European autonomy. As rhetoric regarding the future of NATO and U.S. commitment fluctuates, the ability to manufacture sovereign, low-cost munitions could provide a safety net for the region’s governments. 

Ark Robotics’ Achi warned that the West isn’t adequately equipped for the “mass, affordable” reality of modern conflict, which has been exposed by the Ukraine war. “Most of the military personnel [are] still trying to prepare for the previous generation of warfare,” he stated.

His business is currently developing innovation that allows a single operator to control hundreds of unmanned systems across air, land, and sea. Accessing U.K. manufacturing capacity through the GRAIL platform will allow Ark to efficiently scale production of its systems, he mentioned.

The platform aims to solve the “procurement bottleneck” by creating a secure marketplace where NATO members can access battle-proven tech and set up local manufacturing in weeks, rather than years. 

This Silicon Valley approach, with rapid iteration – the time it takes to design, test, deploy, and refine a piece of military software based on real-world feedback – and software updates delivered over-the-air, contrasts sharply with the lengthy processes of legacy contractors.

Substantial defense companies on both sides of the Atlantic have seen their stock prices soar over the past few years, as investors bet governments’ increased spending on military capabilities will benefit them. 

Revenue has shot up sharply for these companies since Russia invaded Ukraine in 2022, with gains matched only by order intake as many struggle to meet increased demand. This also touches on aspects of investors.

Arms maker Rheinmetall and fighter jet developer Saab have seen the most explosive growth in order intake between 2021 and 2025 among the huge European names, of 323% and 284%, respectively. 

Rheinmetall forecast its sales could grow as much as 45% this year and has commented it is in a “prime position” to arm the U.S. amid the war in Iran.

“It’s now about whoever innovates fastest, scales quickest, and does the cheapest, [that’s] the person that’s going to prevail,” remarked Crawford. “Those are problem sets and pain points that Silicon Valley and other areas of industry have already solved.”

While historically, there’s been a reluctance among early investors to get into defense, that is now changing Because of recent developments. 

“There was a mood in Silicon Valley among private equity VCs to not touch defense, but that mood has changed now,” mentioned Baynes. “One of the main reasons is that there is a more transparent marketplace in defense now than there used to be.”

— CNBC’s Jackson Peck contributed to this report.