The USA has ordered a substantial increase in drone production to significantly expand its military capabilities in the field of unmanned aerial systems (UAS). This comes amid an aggressive push to outpace Russia and China in unmanned warfare. According to reports, US Defense Secretary Pete Hegseth has issued extensive new contracts to expedite drone production and deployment.
Expanded Authority for Commanders
For the first time, commanders at the rank of Colonel or Captain are allowed to autonomously procure and test drones, including 3D-printed prototypes and commercial systems—provided they meet safety criteria. The Pentagon’s budget for fiscal year 2026 includes a 78% increase in investments in UAS and drone defense technology, which will fundamentally alter the military landscape.
Impact on the Stock Market
These measures have already had a significant impact on the stock market: shares of companies like AeroVironment (AVAV) and Kratos Defense & Security Solutions (KTOS) have risen by about 4% in pre-market trading; Red Cat Holdings (RCAT) even surged by around 18%. Throughout the year, AVAV and KTOS have seen price increases of 54% and 75%, respectively, while RCAT has fallen sharply. The broader NYSE Arca Defense Index also rose by about 23% by early July of this year.
For investors, this presents an interesting environment: The new production incentives in the USA could further boost the prices of defense and particularly drone stocks. The increased demand for affordable American military drones, alongside the eased procurement options for commanders, creates a dynamic market with growth potential.
Global Competition
In international comparison, Russia is also massively expanding its drone production—with monthly production rates exceeding 5,000 long-range drones—which further intensifies global competition in unmanned weapon systems. This underscores the strategic significance of the US initiative.