AI in Aerospace and Defense Market Poised for 13.6% Growth by 2029

Key Drivers of Market Growth

AI in aerospace and defense is experiencing rapid expansion, driven by increased defense budgets, geopolitical tensions, and the demand for autonomous operations and predictive maintenance. The market, valued at $25.69 billion in 2024, is expected to grow to $29.27 billion in 2025, with a compound annual growth rate (CAGR) of 14%. By 2029, it is projected to reach $48.76 billion, maintaining a CAGR of 13.6%.

This growth is fueled by the need for efficient decision-making in complex missions, rising commercial air traffic, and investments in military modernization. Key players like Microsoft, Airbus, Raytheon Technologies, and Lockheed Martin are leading the charge, with North America as the largest market.

Technological Advancements and Integration

The adoption of AI technologies in aerospace and defense is accelerating due to advancements in autonomous systems, smart logistics, and data-driven decision systems. These innovations enhance efficiency, accuracy, and resource optimization while reducing human risk. For instance, Safran Electronics and Defense launched the Advanced Cognitive Engine (ACE) in June 2024, an embedded AI solution that improves real-time target detection and decision-support capabilities.

Similarly, Safran S.A. acquired Preligens for $254 million, strengthening its AI-driven surveillance and reconnaissance capabilities. Such integrations highlight the sector's focus on embedding AI into critical defense systems.

Challenges and Industry Response

Despite the growth, the industry faces challenges such as trade tensions and rising tariffs, particularly from the U.S. in 2025. These issues have led to increased costs for key materials and disrupted production schedules. In response, companies are stockpiling materials, pursuing import waivers, and diversifying supply chains to mitigate risks.

The market encompasses hardware, software, and services, including machine learning, NLP, computer vision, and big data analytics. These technologies are deployed across land, naval, airborne, and space systems, with applications in predictive maintenance, surveillance, mission systems, cybersecurity, and autonomous navigation.