It promises to spot terrorists – before they strike.

It will predict killer storms – warning us when and where they’ll hit.

The new technology trend known as “Big Data” is sweeping the globe, and is expected to facilitate stunning – even life-saving – transformations in intelligence-gathering, meteorology, medicine, finance, and virtually every other field you can think of.

But only if a major problem can be solved.

That problem – a critical obstacle, really – is one that keeps getting in the way. It’s called the “memory wall” and it’s the one digital barricade that every computer engineer in the world wants to hurdle.

Today I’m going to give you a peek at the potential solution to this digital bottleneck – a solution so revolutionary that a respected trade journal recently named it one of the 10 technologies most likely to transform the electronics industry.

I’m going to introduce you to the “Killer Elite” that cracked this computing conundrum.

And I’m going to tell you how you can profit from an innovative breakthrough that most retail investors aren’t even aware of yet.

Let me explain …

Virtually every week here at the Strategic Tech Investor, we talk about some new technological advance that’s accelerating the pace of innovation.

Some of these changes are incremental. But others represent true quantum leaps.

More than ever, the leaps are being driven by big, super-powerful computers. One great example is Watson, the “cognitive device” from International Business Machines Corp. (NYSE: IBM) that beat two humans on the game show Jeopardy.

Technically speaking, they are referred to as high-performance computers, and you will find them in the world’s major research labs (and on Wall Street). Let me explain their power in laymen’s terms – they can run through a gazillion calculations in the blink of an eye.

You need that kind of performance to comb through millions of credit-card or stock transactions to spot fraud. To let our intelligence agents grab terrorists before they can do any harm. Or to alert people – via their mobile devices – that a killer lightning storm is bearing down on them.

And that shoves us to smack right into the memory wall – a “Great Wall” if there ever was one.

You see, as these supercomputers have gotten faster – fast enough to drive the Big Data trend – memory has failed to keep pace.

And, in computing, memory is everything.

Take a look at your laptop. There’s just no way you could run a complex piece of software like a design-engineer program on it. Your laptop just doesn’t have enough memory.

The program will crash.

Or your laptop will simply freeze up.

The same dynamic is at work at the high-performance level, but the need for more robust memory is 1,000% greater.

Now you know why a group of companies I refer to as the “Killer Elite” of computer memory have banded to develop a breakthrough module.

The new advance is known as a Hybrid Memory Cube (HMC). And the concept is based on the ultra-fast processors that run today’s computers.

Those processors get their incredible speeds by being embedded with what the industry refers to as multiple “cores.” Simply put, it means they contain several microprocessors – the “brains” that run computer programs – on a single chip.

That same idea forms the basis of the new hybrid Cube.

The stats on this thing are just off the charts…

We’re talking about a memory module that will run up 15 times faster than most of the devices on the market today. Not only that, but the Cube uses up to 70% less energy, and takes up about 90% less space.

You don’t have to be a computer genius to look at those numbers and see just how much the whole high-performance sector and its customers stand to gain.

Clearly, this new device isn’t just some starry-eyed dream that will take a long time to get out of the research lab and into the marketplace. In fact, some members of the “Killer Elite” expect the Cube to start selling as soon as the end of this year.

No wonder the respected trade journal EE Times (as in electrical engineer, or “double E”) chose the Cube as one of the 10 technologies that are most likely to “redefine” the electronics industry.

So, as new as it is, the HMC field doesn’t lack for profit opportunities.

Back in 2011, to get the ball rolling, a number of companies teamed up to form the Hybrid Memory Cube Consortium (HMCC). The 10 members that now comprise the HMCC will produce an open industry standard.

And they also form the “Killer Elite” that I talked about earlier.

A quick review of some of the “Killer Elite” roster underscores the fact that there are some alluring profit opportunities operating in this space.

In addition to old Big Blue (IBM), you’ve got Samsung Electronics Co. Ltd. (KSE:005930), the South Korean heavyweight that’s one of the world leaders in mobile phones, tablets, TVs, LCD panels and semiconductors.

Other group leaders include all-star chip designer ARM Holdings PLC (NasdaqGS: ARMH), turnaround candidate Hewlett Packard Co. (NYSE: HPQ), and Open-Silicon Inc.

Another 75 high tech firms who intend to adopt the Cube technology have joined the consortium in what I’d describe as sort of an “associate” member status.

Within this broad group – the “Killer Elite” and the “adopter” associates – are a number of great-to-own tech stocks.

And there’s one more Cube-related “Killer Elite” player that I like – so much so, in fact, that I recommended it to subscribers of my Radical Technology Profits service.

I’d love nothing more than to share this pick with you, too. If you want to find out more, take a look here.

And we’ll be talking again later this week.

I’ll never forget my conversation with defense-industry leader Bob Beyster.

Armed with a doctorate degree and decades of experience, Beyster ranked as one of the U.S. defense industry’s true visionary thinkers. That came through loud and clear when I interviewed him for Signal magazine back in early 1999.

Beyster could talk with ease about everything from the impact of the dot-com boom of the 1990s to the future of information technology at the Pentagon.

This University of Michigan-educated scientist was a walking, talking encyclopedia of global tech trends. He gave me loads of insight into the major shifts that would reshape our world far beyond defense – from changes in telecommunications to how the Web would slash business costs for thousands of global firms.

With fond memories of that chat, I have been a faithful follower of the groundbreaking company Beyster founded some 35 years ago.

I’m referring to Science Applications International Corp. (NYSE: SAI), now headquartered in McLean, VA.

That’s why I was glad to learn recently that SAIC is taking a leadership role in a major defense trend – unmanned vehicles, usually referred to as drones. SAIC is helping the Pentagon pioneer underwater drones that can detect a new generation of ultra-quiet diesel-electric submarines that threaten U.S. security.

In a moment I will share those details with you.

But first, I want to make sure you know why I spend time talking to senior leaders like Beyster. See, these guys are not only big thinkers driving the Era of Radical Change, but many of them are also profit machines.

They often define U.S. entrepreneurship – the unique quality that makes America the perennial leader in global high tech … and in the creation of wealth for its free-market investors.

An entrepreneur himself, Beyster is known for taking two bold management steps.

First, he laid the groundwork for employee ownership of a publicly traded firm. That may sound like an inherent contradiction. But not the way Beyster did it.

At the time I talked with him, only the employees could own stock in SAIC. Beyster stands out today as a leader in pushing the concept of employee-owned firms. After he retired as CEO, the company launched an IPO, and its shares are publicly traded still. (In fact, to better focus on a changing market, SAIC later this year plans to split into two publicly traded firms.)

Second, Beyster became the ultimate change agent. He created an atmosphere that catered to entrepreneurs – which turned SAIC into an incubator for innovation. Indeed, many of Beyster’s “employees” went off to start their own firms.

Between 1975 and 2003 – the 18-year stretch for which Beyster kept records – roughly four dozen alumni started new companies.

No doubt, most never became household names. You likely never heard of Michael A. Chipman. Fact is, he created a little software package called TurboTax.

Shortly after going public in 1993, Intuit Inc. (NasdaqGS: INTU) acquired that firm – and has gone on to return roughly 2,600% to investors.

In 2004, Beyster retired from the company he’d founded back in 1969, at the height of the Vietnam War. But his focus on making sure that SAIC would remain a technical leader lives on today.

That’s clear from the recent news that the mid-cap firm just got a key “drone” contract with DARPA, the Pentagon’s research unit.

These days, most drones are airborne, and are known as “unmanned aerial vehicles,” or UAVs. They represent a major trend toward pilotless military planes.

But under a contract worth at least $58 million, SAIC will build and test an unmanned underwater vehicle (UUV) with a very special purpose.

Simply put, DARPA wants a robotic anti-submarine vehicle – a “sub-hunter” drone that can operate for extended periods, and cover thousands of miles of ocean as it does so.

You see, China, North Korea and Iran between them now have 73 diesel-electric “boats,” as they’re known in military parlance. About half are the new, super-quiet subs.

And more are on the way.

In an era in which ultra-modern nuclear subs get all the headlines, here’s a stunner: Diesel-electric technology – which dates back to the late 1920s – is one of the biggest sources of worry in the Pentagon’s shadowy corridors.

And for good reason. The propulsion systems of these boats are nearly silent. Diesel-electrics run on big diesel motors when running on the surface, but switch to batteries when submerged.

That power system is nearly silent, making it the perfect design for the shallow waters just off our coastlines.

These submarines also possess the “passive” sonar systems that make it possible for these submarines to sit and listen, submerged and quiet, just off our shores.

It’s a nasty package, and one that can’t be ignored: We don’t want the silent subs of our enemies to be able to launch a first strike on the U.S. from as little as a mile away.

I believe this technology is vital, and the sooner we field these drones, known as ACTUVs, the better. It will give us an edge over China – we’ll be able to find their quiet subs long before they can find ours, shifting the balance of power back to the United States.

There’s a fitting synchronicity to this DARPA award, for it means that SAIC has come full circle: Beyster served as a naval officer during World War II and later did scientific research that helped develop our nuclear subs.
America is much better off today because of Beyster’s contributions and long service. And the looming two-way split-up of the company he founded will undoubtedly touch off an entirely new cycle of wealth-creation.

We’ll keep you posted. After all, that’s precisely the kind of opportunity we look for … here in the Era of Radical Change.

Michael

At one time or another, I’m sure that we’ve all been outraged by stories of rampant government waste – especially in areas of aerospace- and defense-related research.

But today I’m going to tell you about a NASA-related tech program that led to a big payoff. In fact, investors who knew what to look for could’ve turned $10,000 into $41,900 – a 319% return – in just 29 months.

I’m relating this story for a couple of reasons. It shows you why I spend so much time looking at the research that’s underway in labs at both the university and national level. And it also explains why I write to you so frequently about cutting-edge science where I believe there’s a big potential payoff.

My ultimate goal, you see, is to tell you about profit opportunities like this one before they occur.

And one of the best ways to do that is by keeping a sharp eye on federal tech programs.

Fortunately, that’s an obsession of mine – and one that I developed long ago.

You see, I grew up in a military family. My dad is a highly decorated U.S. Marine Corps captain who retired from the service to join Aviation Week & Space Technology, where he became its award-winning senior military editor.

Starting when I was a senior in high school (which was more years ago than I’d like to admit), my dad and I have talked often about government research and the huge payoffs for the civilian economy. I later went to work for him covering government technology during the Reagan Star Wars program.

I’ve talked with scores of scientists, business leaders and government officials about this field for more than 25 years. It’s a great way for me to stay abreast of key trends and investment opportunities.

The bottom line is that I know what to look for. And I know what’s on the cutting edge.

Take “cloud computing,” which transforms hardware and software into a service that can be delivered over the Internet.

Seeing NASA get involved with this hot new trend was a signal that a particular program warranted a closer look. It was also a stamp of approval on an emerging technology.

By lending its help to this fast-growing slice of the high-tech sector, NASA helped savvy investors reap big gains from one specific company. The spinoff effects would lead to billions in new wealth across the high-tech sector.

The company in question is cloud-computing pioneer Rackspace Hosting Inc. (NYSE:RAX). Founded in 1998, Rackspace now boasts nearly 200,000 clients in more than 120 countries.

Clearly, NASA can’t claim it made the company the success it is today. But it did give a huge stamp of approval for both Rackspace and its mission of providing open-source cloud computing.

That was the main thrust behind the OpenStack Foundation that the company and the agency launched with $10 million in funding. Today, that program is a global collaboration of developers and cloud-computing experts. They have created an open-source platform for public and private clouds used around the world.

Cloud computing is a loose term that simply means more of the huge amounts of data the world needs are now hosted on “virtual” servers. This software component allows the data servers to handle far more traffic and storage. This helps users avoid spending time and money starting and running their own computer networks.

For NASA, the OpenStack program really began in 2008 when it launched Nebula. That was a project to unify the ocean of data the agency has to manage across what is very much a far-flung organization. NASA soon found that Rackspace was working along similar lines and had already written quite a bit of code.

Here is how Ray O’Brien, former head of Nebula, described the joint effort between NASA and Rackspace in a blog post last May:

“Our hope was that a community would form around these two pieces of software toward the construction of an open source cloud operating system. To say that our greatest hopes in this regard were met would be an understatement. OpenStack today has the support of hundreds of individuals and organizations around the world, all set on realizing the original vision for the project.”

When OpenStack launched in July 2010, Rackspace shares traded at $17.14 (based on the closing price set on July 6). Yesterday, the stock closed at $73.53 – a 319% run.

Some analysts have questioned whether Rackspace can continue its rapid growth, since open-source software means anyone can tweak it and then sell a competing cloud package. A piece in Thursday’s Investor’s Business Daily made that very point.

Despite the threat, or perhaps because of it, Rackspace shows zero intent of changing to a closed format. But that doesn’t mean the stock is headed for a rout. It does mean that Rackspace has to focus like a laser beam on its core business if it wants to continue its heady growth.

Also, I think doubters are missing the big picture. As I see it, Rackspace has helped make cloud computing a key high-tech ecosystem. That means more overall opportunities for tech investors.

Consider that Dell Inc. (NasdaqGS:DELL) Hewlett-Packard Co. (NYSE:HPQ) and Intenational Business Machines Corp. (NYSE:IBM) are all OpenStack members. The first two are stock laggards. But IBM has returned roughly 60% to investors since early July 2010, a figure that doesn’t include the benefit of a roughly 2% dividend.

Web-retailer Amazon.com (NasdaqGS:AMZN) is a major cloud-computing firm that bumps up against Rackspace. It even does business with NASA. In the same period, it has returned 136% to shareholders – an example of the “spinoff benefit” that I mentioned above.

Let me close by noting that I see a lot of major trends ahead that will mean big gains for investors in the Era of Radical Change. As our case-study look at Rackspace and OpenStack makes clear, it pays – and I mean that literally – to keep track of federal support for high tech.

Rest assured that I intend to let you know about more cutting-edge programs that I think will offer investors the chance to score big gains. Stay tuned…

Michael

P.S.: We won’t be publishing next Tuesday because of the Christmas holiday. So, I hope you have a great one. We resume next Friday with December’s “Fascinations of the Month.”

Israel has a radical new ballistic-missile defense system, known as the Iron Dome, and it has saved countless lives during the last couple of weeks.

The Iron Dome is not a literal “protective bubble” set up over a city.

But it might as well be…

This portable system is made up of three components: 1) a detection and tracking radar system, 2) the Battle Management & Weapon Control (BMC) – basically a computer control center – and 3) units that fire missiles.

The radar detects incoming missiles and tracks their trajectories. Then, using this data, the BMC calculates where the missiles will likely hit and determines whether they pose a threat – and only then does the firing unit launch an interceptor (also a missile). In this way, they take out the incoming rockets in midair, where it’s safe to do so, far before they can reach their target on the ground below.

This is no easy feat. Think of standing in a field with a bow and arrow and trying to shoot down another arrow launched from a few hundred yards away. What’s more, the system can handle multiple threats simultaneously and works in any kind of weather (day or night).

Designing something that complex boggles the mind, as does the fact that it works so well. Thanks to an unending stream of breakthroughs in computing, sensors, radar, software, and guidance systems, we’re at the point where one “arrow” can now shoot down another in a matter of seconds.

The Iron Dome is a clear game-changer in defense technology.

Indeed, the system is getting rave reviews in the U.S. media. In the last few days, both the Washington Post and Wall Street Journal have published long, detailed accounts of the Iron Dome’s great success rate at destroying missiles during this latest conflict in Israel and the Gaza strip.

The Dome showed an amazing success rate. Before last Wednesday’s cease-fire, it knocked down 421 rockets launched from Gaza and bound for Israeli cities. We’re talking a rocket “kill” ratio of 84%.

With the Iron Dome intercepting Hamas missiles left and right, Israel suffered only six casualties in seven days of rocket strikes.

Thing is, ballistic missile defense is not just a big deal in the Middle East. It’s a big deal here in the U.S., too.

And right now, I’ve got my eye on a firm that’s playing a big role in America’s ballistic-missile defense (BMD) technology. It’s a small-cap firm, so don’t worry if you haven’t heard of it. Most people don’t even know the Pentagon is hard at work in this area. But there’s a very good reason for investors to know about it.

Let’s put this investment opportunity in context…

As it turns out, Obama gave the green light to have the U.S. spend some $275 million on the system since 2010, according to The Wall Street Journal. In the hopes of forging a peace deal, the president wants to reduce the rocket threat to Israel, while getting that nation to agree to give back some captured territory.

By just about any standard, the system has been a godsend. And not just for Israel, but for the U.S. and the balance of power in the Middle East.

It’s important to note that Israel is still a long way from shooting down the kind of complex missile that a nuclear-armed Iran would fire their way.

But trust me, they’re working on it…

For now, Israel has proved that ballistic missile defense works well in decisive combat settings. And that’s a good thing for investors. See, defense contractors make guidance systems and other types of tech needed to have one missile shoot down another.

Now you know why the U.S. is investing in ballistic missile defense. One of the big wins here is for the Navy. Many of its ships will get equipped with the Aegis Ballistic Missile Defense system.

Of course, two big-cap defense firms have Aegis contracts. They are Lockheed Martin Corp. (NYSE:LMT) and Raytheon Co. (NYSE:RTN)

But I know of a small-cap defense firm that counts the Navy as a major client and also has BMD sales. Because much of the effort remains classified, the firm hasn’t made all of its work public.

And yet, this company is a contract machine. It already has $1.1 billion in firm defense orders, meaning it will ring up nearly every dollar of those awards. It also has a pipeline of bids worth about $5 billion that should convert to about $1.5 billion in future revenue.

Meanwhile, this firm has a market cap of only $260 million and trades at less than $5 a share.

I will have much more to say about this area of high-tech defense in my webinar that airs tomorrow evening at 7 p.m. EST. You can still reserve your place right here. In particular, I’ll be talking about a novel part of missile defense known as directed energy.

This is fascinating stuff, and I’m passionate about this sector. I hope you’ll join me.

P.S. Keep an eye out for November’s Fascinations of the Month on Friday. You won’t want to miss this one.

Few things push the frontiers of the future more than an army’s desire to defeat its enemies.

Just look at what happened to America after World War II. Our need to counter Soviet power delivered a tidal wave of innovation.

Defense spending led to the Internet, microwave ovens and GPS devices – not to mention millions of jobs from one of the great tech booms in history.

Now comes the “New Cold War” – one that will also prove a boon to a wide range of tech industries.

This time the United States is racing against China.

You see, the Pentagon recently announced plans to check Chinese ambition with a wide range of responses. They fall under a new program called “Air Sea Battle.”

It has U.S. President Barack Obama’s backing. The president told our Pacific Rim allies the U.S. will provide a safety net in the region. It’s a clear signal to the Pentagon to get cracking on key research and development (R&D).

This certainly comes at an awkward time. The U.S. faces a daunting debt crisis. With Washington’s failure to reach a budget compromise, big defense cuts loom.

That will hurt in the short run, no doubt. But over the long haul, as it has done several times in post-war history, the Pentagon will find ways to push new technology in an era of tight-money.

Forced to do more with less while challenging the Chinese, the Department of Defense (DoD) will invest in high-value technology.

Here are a few examples of what I’m talking about.

Virtual Battleground

Consider the impact this will have on cybersecurity and warfare. China tries to hack our defense computers and steal our most sensitive secrets almost daily.

Needless to say, we want to put an end to that. But we also want to learn how to shut down China’s computer networks so we can defeat them without firing a single shot.

Consider what happened to Iran’s nuclear program in late 2010.

Used as a cyber weapon, the Stuxnet virus crippled Iran’s computers, putting the country’s plan for atomic weapons at least two years behind schedule.

Of course, there’s a civilian spinoff, which along with countless other viruses, poses a threat to average Americans, as well as U.S. corporations.

Making networks more secure would help banks, hospitals, and other firms protect sensitive data from hackers. It also will aid the fast-growing world of mobile commerce, which will soon become a major target for crafty cyber thieves.

That’s not all.

The Not-So-Friendly Skies

Unmanned aerial vehicles clearly will get a lift from the New Cold War. Already, the U.S. makes great use of drones to fight terrorists.

And training pilots to operate drones remotely just got a big boost. Working at a Massachusetts Institute of Technology (MIT) lab, a former Navy pilot wrote an iPhone app that allows anyone with a smart phone to learn the basics in a matter of minutes.

But the Navy has a much bigger goal — to develop jet aircraft that can take off from and land on an aircraft carrier without a pilot.

It’s one of the more daring feats in all of aviation.

Commercial flight would clearly benefit from these innovations. It would help the Federal Aviation Administration’s (FAA) efforts to figure out how to fit unmanned aircraft into the nation’s skies.

I predict they’ll start with cargo planes and develop a bulletproof safety record before asking passengers to climb on board.

Communication is Key

The New Cold War also will push advances in how well machines “talk” to each other.

Where Air-Sea Battle is concerned, DoD leaders want stealth aircraft and submarines to work closely together. Inevitably, that will mean equipping both with advanced devices that can talk through deeply encrypted channels.

Of course, better machine communications also could boost the next generation of Internet technology known as the “Semantic Web.” Currently, the web doesn’t share data in a robust way. Instead, the information remains disconnected as though it were all stacked in lots of silos you can’t easily see.

Think of the Semantic Web as a series of bridges linking millions of silos. Machines will develop the ability to understand the “semantics” of human language and give you the exact answer you need.

Of course, all this means artificial intelligence (AI) will get even better. That will have ramifications that impact the economy of the future.

Remember, China provides the U.S. with powerful reasons to push defense technology.

First of all, China’s navy has harassed U.S. Navy ships and those of our allies in the South China Sea several times since 2009.

And second, its fast economic growth has fueled a large-scale weapons buildup.

Still, that plays to a major U.S. strength – using advanced technology to make each of our soldiers as lethal as several from an opposing army.

Indeed, if the United States wants to maintain its edge over China, it will have to invest in advanced weaponry. And that will improve America’s future technology.

News and Related Story Links:

• Washington Times:
  Pentagon battle concept has Cold War posture on China
• Discovery:
  Unmanned Airplanes Coming to a Terminal Near You
• Wired:
  Unmanned Airplanes Coming to a Terminal Near You
• PopSci:
  MIT Researcher Develops iPhone App to Easily Control Swarms of Aerial Drones
• Money Morning:
  Profit From Congress’ Next Move With a Cybersecurity Stock That Could More Than Double
• Money Morning:
  The “Miracle Material” That Will Change the World

I can explain the impact of President Obama’s new defense budget to investors in one word – mergers.

Indeed, the M&A field will remain a driving force in the defense sector for at least the next two years.

The good news for tech investors is that Obama’s focus fits with the Pentagon’s push for more high-tech breakthroughs.

We’re talking about more drones instead of fighter jets and robots to replace troops for some tough jobs.

But don’t gloss over information technology since it cuts through the entire supply chain.

Since World War II, the U.S. military has pursued high tech at a rapid pace.

However, that trend gained speed in recent years after the Pentagon rolled out the concept of making computers an even bigger part of our fighting forces.

You see, the top brass likes to call it “net-centric warfare.” I know it sounds complex. But it really is very simple.

Here’s the big idea: link every facet of defense to secure networks. Ideally, that means senior leaders could track every boat, bullet and bayonet on one computer screen.

Obama’s Budget Cuts in a Modern World

And now, new budget cuts mean the military must do more with less.

Today, we’re facing a new Cold War with China, while at the same time we are cutting spending and reducing troop strength.

Here’s what it all means for investors…

At least once a month, the CEO of a company with great tech realizes he needs more financial muscle to survive the leaner times.

That usually means selling to a larger firm.

So look for defense companies that have access to financing or enough cash to go on shopping sprees.

Just last month, Lockheed Martin Corp. (NYSE: LMT), revealed it bought a firm that provides autopilot and other devices for small drones.

I believe this is a shrewd purchase. After all, the military is clearly moving toward more unmanned aerial vehicles.

These UAVs come in a wide range of sizes and applications.

At one end we have the Predator drone. It’s about the size of a private jet and receives heavy use by the U.S. against Al Qaeda terrorists.

Now just shrink that down to the size of a large insect and you have the new generation of drones. In the very near future these types of drones will find wide use in surveillance missions.

A high-tech team at Wright-Patterson Air Force Base is working on micro drones that look like bugs. They fit in the palm of your hand and are designed to find the enemy in tight urban terrain.

Cyber-security will also remain an active area for the Defense Department and Homeland Security. While Obama’s budget for 2013 cuts 100,000 troops, it does emphasize cyber-operations.

Consider that on December 29 Raytheon Co. (NYSE: RTN) said it is buying a small, privately held cyber-security firm. That was the second such merger in three weeks for Raytheon.

Those two Raytheon mergers occurred just weeks after the Pentagon said it reserves the right to respond to an attack on its computers with the use of force.

The field is attracting foreign interest as well. French giant EADS (EPA: EAD) says it wants in on the action and willbuy firms to do so.

Though EADS hasn’t said it will buy in the U.S., it’s a good bet the company will at least look in America as it tries to balance out the sales of its jumbo jets.

On the other hand, not all the defense mergers will turn on high tech…

Mergers & Acquisitions Drive the Sector

Just look at Force Protection. The company makes blast-resistant vehicles that saw heavy use in Iraq.

Last November, General Dynamics (NYSE: GD) bought Force Protection for about $360 million. Coming just days after Obama said the U.S. would leave Iraq, the deal defined synergy.

General Dynamics already makes the Abrams, the nation’s main battle tank. It also supplies the Stryker, an armored fighting vehicle.

In the meantime, also look for some defense firms to diversify. Some will tap civilian markets for new sales.

Take the case of ManTech International Corp. (Nasdaq: MANT). In early January, ManTech completed the purchase a small company that moved the defense firm into health-care information technology.

Ironically, the purchase of Evolvent Technologies actually helped ManTech score new defense sales. On February 6, the firm said Evolvent became part of an Air Force program worth nearly $1 billion.

Other suppliers may simply exit some of their defense lines. That’s the case with L-3 Communications Holdings Inc. (NYSE: LLL).

Last July, L-3 said it will spin off several units and create a new publicly traded company. L-3 said shares of Engilitywill start trading in the first half of this year.

The company says it will distribute shares of Engility to L-3 shareholders as a special dividend not subject to taxes.

Thus, the defense M&A wave is part of the Era of Radical Change.

Tight U.S. budgets means the Pentagon must make even greater use of high-tech to develop the fighting force of the future.

And to cope with these shifting winds, defense firms must realign to find new sources of cash.

All of which means new opportunities for tech investors.

The mainstream media was all over Microsoft Corp. (Nasdaq: MSFT) co-founder Paul Allen’s recent announcement proclaiming he intends to “transform” the space industry.

But they missed the real story – one that will make a few savvy investors a small fortune.

If you want big profits from the next generation of space travel, keep an eye on new developments at a small but highly respected research arm of the Pentagon.

It’s the agency that brought you the Internet. And now it wants to create a whole “new space system.”

Don’t get me wrong. I believe Allen’s investment is an important vote of confidence in for-profit space travel.

But hold on to your wallets folks, because I’d be surprised if he or any investors ever turn a profit from Allen’s new venture.

In reality, the story played to America’s obsession with celebrities: Famous billionaire says he’ll invest up to $200 million in new hybrid space crafts that will launch satellites for industry and government.

After reading about Allen’s foray into outer space you might have been tempted to jump into some obvious industry stocks.

Orbital Sciences Corp. (NYSE: ORB) boasts some exciting technology. But for now, steer clear of the stock.

Its fortunes still rest too heavily on NASA, which because of budget restraints axed a planned return to the moon.

The so-called Wall Street “pros” may tell you to buy shares of Lockheed Martin Corp. (NYSE: LMT), a big-cap concern that spans the defense-space spectrum.

But other divisions of the Pentagon are cutting back, which means Lockheed will face cash flow challenges for at least the next two years.

So let me tell you what’s really going on – I believe a recent announcement by an innovative arm of the Pentagon will become an investment bonanza.

It didn’t get much play in the major media because it’s hard to see the profit potential in recycling dead satellites still orbiting earth.

Enter the Defense Advanced Research Projects Agency, widely known as DARPA. Under its Phoenix program, the agency wants to find ways to harvest parts from old satellites.

To do so, DARPA intends to transform the nation’s space system. I have followed this field for years and I firmly believe DARPA’s interest will help lay the foundation for a whole new era of space travel.

No doubt, other federal agencies want in on the action. The Federal Aviation Administration (FAA) recently filed a 94-page report projecting commercial space flights through 2020.

And U.S. President Barack Obama wants NASA to pursue robotic technology and to land spacecraft on asteroids.

But pay attention to DARPA. It has a way of taking high tech to the next level, leaving behind a trail of profits.

Nearly 50 years ago, it started a little computer project to link science labs. Who could have predicted how far that would take us?

Now you can surf the web from your smart phone, courtesy of DARPA.

More recently, it had a huge impact on nanotech, robotics, and unmanned aerial vehicles.

A DARPA-backed nano hummingbird equipped with surveillance video recently made TIME magazine’s list of the top 50 inventions of 2011.

To pull off the feat, DARPA worked with AeroVironment Inc. (NASDAQ: AVAV), a tech leader that makes small military drones.

So, we’re looking for the next AeroVironment. Trust me. It’s out there, and I’ll find it once DARPA starts writing new contracts. You’ll be the first to know when that happens.

Clearly, the right companies will understand DARPA’s goals. The agency wants to recycle many of the 100 satellites orbiting 22,000 miles above earth.

Here’s the incentive: Those satellites are worth $300 billion.

To remove antennas and other hardware, DARPA will employ advanced robotics and nano satellites that talk to each other.

Under the plan, a giant satellite called a “tender” would orbit earth as a 21st century service station.

Of course, the DARPA team will need to create unique space tools, so the agency wants to improve on a wide range of key technology. That includes underwater imaging, computerized medical robots, and wireless control systems.

All these tech breakthroughs will yield lots of great investment opportunities.

I predict that in the near future, DARPA will help link robotics, space communications, and artificial intelligence in profoundly important ways.

And talk about “outsourcing.” I think it’s inevitable we’ll have robots building other robots and even constructing entire space stations while orbiting earth.

They’ll send drilling bots to asteroids and other planets to mine key resources.

And eventually, self-replicating space stations will result in a constellation of machine-run satellite “cities” floating through the heavens.

So, despite the nation’s budget battles, the Pentagon will nonetheless play a major role in the “Era of Radical Change.”