Newton's approximation for the impact depth for projectiles at high velocities is based only on momentum considerations. Nothing is said about where the impactor's kinetic energy goes, nor what happens to the momentum after the projectile is stopped.
The basic idea is simple: The impactor carries a given momentum. To stop the impactor, this momentum must be transferred onto another mass. Since the impactor's velocity is so high that cohesion within the target material can be neglected, the momentum can only be transferred to the material (mass) directly in front of the impactor, which will be pushed at the impactor's speed. If the impactor has pushed a mass equal to its own mass at this speed, its whole momentum has been transferred to the mass in front of it and the impactor will be stopped. For a cylindrical impactor, by the time it stops, it will have penetrated to a depth that is equal to its own length times its relative density with respect to the target material.
This approach only holds for a blunt impactor (no aerodynamical shape) and a target material with no fibres (no cohesion), at least not at the impactor's speed. This is usually true if the impactor's speed is much higher than the speed of sound within the target material. At such high velocities, most materials start to behave like a fluid. It is then important that the projectile stay in a compact shape during impact (no spreading).
This is a standalone report documenting the latest updated version of the Young/Sandia penetration equations and related analytical techniques to predict penetration into natural earth materials and concrete. See Appendix A & B for intro to penetration equations.