The New WFH (War From Home)

Missile Defense, Counter-Unmanned Technology, Electronic Warfare, and Surveillance

Introduction

Modern warfare has evolved.

Cheap drones are torching billion-dollar fortresses and countries are waging direct warfare from thousands of miles away. Last year, Houthi drones successfully blocked global commerce through the Red Sea despite US carrier strike groups stationed in the region. More recently, Ukraine unleashed a surprise attack of 104 drones 800km deep into Russian territory, lighting up the Kirishi refinery and significantly damaging Moscow’s aerial assault capabilities.

Weeks later, Israel ran the same playbook, using smuggled drones (along with traditional assets) to wreak havoc on Iranian nuclear facilities and military targets as a part of its broader “preemptive strike” on the country. Tehran responded to Israeli air strikes by hurling hundreds of Shahed drones, cruise missiles, and ballistic missiles towards Tel Aviv and interior targets. Israel’s missile defenses have successfully blocked a large majority of the strikes, but at roughly $45,000 per Tamir shot such defenses are not free or unlimited. Iranian ballistic missiles have continued to penetrate the Iron Dome, causing direct damage on civilian and military installments. The U.S.’ involvement began with a USAF crew that never had feet on the ground anywhere outside of Missouri.

Iran, the US and Israel are ostensibly “at war” (or at least in conflict). This is occurring with no troops deployed on foreign soil and each country thousands of miles away from the other.

What becomes clear across these various theaters is a shift in the strategy and tactics of modern warfare that challenges the traditional views of asymmetry. We have entered the new WFH, that is, “War from Home”. The implications: for under-resourced countries, a new form of leverage, for countries with lots of resources, a wake-up call.

This pattern recurs throughout history: technology wins wars. Great powers that rely on yesterday’s tactics can be quickly humbled. Consider France’s Maginot-mentality crumbling to the German Blitzkrieg. Or the linear forces of Britain falling to the guerrilla colonial revolutionaries. Raw firepower can often be duped by agility, communications, distribution, and innovative tactics – perhaps the lack of firepower is even the constraint that leads to such developments (a cross-theme callout to China’s GPU-starved Deepseek advances).

Since the fall of the Berlin Wall, war has been mostly limited to proxy battles in underdeveloped nations or US occupations. This regime is quickly unraveling; hot wars between major military powers are developing, the battlefield is being rapidly re-defined, the importance of “the best offense is a good defense” has never been more stark.

In short, the way we wage war has gone through an inflection point.

Why should investors care?

First, we see a massive fiscal realignment towards defense spending in the US and globally (among NATO members).

Second, we see military superiority being rapidly redefined by technology.

Third, we see the hard catalysts of well-armed adversaries – Russia pushing into eastern Europe, Israel/US fighting Iran and its proxies in the Middle East, and China’s long-standing intention of reunification.

For the first time ever, the FY2026 US defense budget blueprint has broken the $1 trillion ceiling. While increased spending will be a boon across the military industrial complex, much of the new spending will be directed towards new technology. The next big defense cycle is electronic.

Nobody is under the illusion that the U.S. and Israel are not at the top of the list when it comes to offensive capabilities. However, with the risk for radical factions and guerrilla attacks climbing every day, defending against low-cost, high-potential-damage technology becomes increasingly important.

The Pentagon recognizes the changing landscape of modern war. In a world of UAVs, satellite-based weaponry, and intercontinental hypersonic missiles, the modern battlefield is one that prizes technology and industrial production capacity over flesh and blood. The current House reconciliation bill, the One Big Beautiful Bill Act (OBBBA), adds $13 billion for missile defense and authorizes a “Golden Dome” space layer, while singling out a $693 million C-UAS fund that can be drawn down at will.

We originally published our Electronic Defense and Counter-Unmanned Aerial Systems (C-UAS) as part of our thematic watchlist, “25 Trades for 2025.” Now, we’re seeing Trump’s fiscal realignment and geopolitics converge to create a durable next leg up.

One of our most successful thematic primers was Fiscal Primacy in September 2023, published long after the trio of Biden discretionary spending bills had been signed into law. The success was not in predicting the weather – but simply noticing that it was raining.

While nothing is “set in stone” yet with regards to defense spending, we think this specific area of defense should see bipartisan support. And since some companies will be the recipients of that money, we’re heads down in defense for now.