Should You Buy The Dip In Drone Stocks And ETFs?

Drones have revolutionized warfare in the Middle East and Ukraine. Drone attacks are among Iran's core tactics for striking US bases and targets in Gulf states.

The US military has deployed sea drones to help clear mines in the Strait of Hormuz. This month, US forces also launched drone boat attacks in the first combat use of sea drones.

Ukraine's mass drone production has helped turn the tables in the Russia-Ukraine war, now in its fifth year. Its mid- and long-range drones have struck Russian air bases, army convoys, and oil refineries, while its sea drones have targeted Russian warships and commercial vessels.

China dominates global drone production, making the expansion of domestic drone capabilities a critical priority for the United States.

In May, The Wall Street Journal reported that the Trump administration was in talks to fund US drone companies. Drone stocks such as Unusual Machines (UMAC - Free Report), Kratos Defense & Security Solutions (KTOS - Free Report), and AeroVironment (AVAV - Free Report) surged following the report.

The White House requested a whopping $54.6 billion for the Pentagon's Defense Autonomous Warfare Group (DAWG), which coordinates and develops unmanned systems, artificial intelligence, and autonomous drone swarms, in the FY27 budget.

In Europe, NATO has announced a Drone Edge initiative, with more than $40 billion committed across 20 member states over the next five years.

Drones are also critical to the broader push toward commercial and industrial autonomy, including applications in delivery, inspection, agriculture, and security. These companies stand to benefit from growing military spending and the increasing use of autonomous systems in modern warfare.

Many drone companies are small-cap, highly volatile, and trade on headlines. Drone ETFs provide exposure to a diversified basket of stocks positioned to benefit from the theme. In addition to pure-play drone companies, these funds also hold defense giants such as Northrop Grumman (NOC - Free Report) and Lockheed Martin (LMT), which are developing next-generation autonomous systems.

To learn about the REX Drone ETF (DRNZ - Free Report) and Defiance Drone and Modern Warfare ETF (JEDI - Free Report), please watch the short video