This article does not constitute any investment or trade recommendation. I write as an attempt to learn about a subject and to document my investing journey and decisions. I am not an investment advisor. I might severely underperform the market. Complete loss of capital is a possibility. My investment positions related to this piece are disclosed at the end of the article.
Intro
The Thucydides Trap is a concept from history and geopolitics about how wars can emerge when a rising power threatens an established one. The idea comes from the ancient Greek historian Thucydides, who described how the rise of Athens and the fear it caused in Sparta led to the Peloponnesian War.
As for its modern version, it is the rise of China and the fear of the global hegemon, the United States of America.
One of my favorite trends to invest in is the US-China rivalry trend. That trend will last decades, if not for all of our lifetimes. It has serious investment implications, with many long and short opportunities. In a previous piece, I described how bullish I was on some US energy producers, especially in the solar industry. The US-China rivalry is a technological war, where each opponent's step ahead on a key technology will trigger an almost symmetric and powerful response.
My framework for investing is then quite simple: if China takes the lead – and they do have a lead already in many key technologies, the US, as the dominant empire, is inevitably bound to respond strongly. This spans key technologies such as AI models, high-end chips, robots, EVs, and weapons.
Today I’m writing about how bullish I am of some U.S. made robots, especially the flying ones, also called drones.
The political tailwind
Many politicians from both US parties, Republicans and Democrates, see China as the biggest threat to the US, and will pass laws that will incentivize and protect US companies in all areas deemed as strategic.
The end goal is, of course, for the U.S. not to be reliant on any foreign power for key industrial components or resources, to maintain their own industrial powerhouse, and to prevent any sensitive data collection by a potential hostile adversary from both hardware and software vectors.
As for drone specifically, the FCC effectively stopped in late 2025 from authorizing new foreign-made drone models for use in the U.S. This prevents new DJI or Autel models from legally entering the market, leaving a massive vacuum for U.S. manufacturers to fill.
Discussions
The ban on drones already started with the previous administration under Joe Biden (2021–2025):
Treasury Investment Ban (2021): DJI was added to the "Chinese Military-Industrial Complex Companies" list.
The American Security Drone Act (ASDA): The ban in 2024 prohibited federal agencies from using federal funds to purchase or operate drones manufactured by "covered foreign entities".
The Biden administration doubled down on the Blue UAS program. This initiative vetted and approved specific "trusted" drone models (mostly from U.S., French, and Canadian companies) for government use, effectively creating a white-list that excluded all Chinese hardware.
Why drones are a strategic technology
While the Russo-Ukrainian war unveiled to many how drones are a game changer in terms of warfare, it’s important to understand that drones are a critical dual-use technology, both military and civilian. Drones are not just weapons: they’re a new platform.
1. Drones are a military game-changer
For decades, military strategy relied on high-end platforms: $100 million fighter jets and $2 billion destroyers that are too expensive to lose. Drones have flipped that calculus.
Asymmetric Warfare: a $2k FPV (First-Person View) drone can disable a $10m tank.
Mass over Perfection: strategic dominance is shifting from who has the best aircraft to who can manufacture the most aircraft. Programs like the U.S. Replicator Initiative are designed to overwhelm adversaries with attritable autonomous systems.
Persistence: Unlike human pilots who fatigue, loitering drones can stay over a target for 24+ hours, creating a permanent eyes-on capability.
2. Drones are becoming part of the core economic infrastructure
In agriculture and energy, drones perform mapping and inspections that were once too dangerous or expensive for humans. A country that controls the drone stack (the AI, the hardware, and the data) controls the efficiency of its economy.
Drones are used to increase Industrial Productivity in many areas:
Agriculture (crop monitoring, spraying)
Logistics (last-mile delivery)
Construction and energy inspection
Disaster response
3. Intelligence, surveillance, and data dominance
Drones are essentially flying sensor platforms, which is why the U.S. banned Chinese-made drones.
They are used in multiple data collection fields:
Real-time video, thermal imaging, and mapping
Border control, policing, and infrastructure monitoring
4. Drones are the “first-wave” real-world embodiments of AI
Drones are the bodies of an AI agent operating in the 3D physical space.
Compared to humanoid robots, drones are easier to operate as the physics are simpler (fewer contact interactions), and there is a high tolerance for error with in air rerouting.
Swarm intelligence: drones can share their sensor data with an AI agent and be coordinated as a swarm to perform a task.
The bull thesis
It should now be clear what the bull thesis is:
Drones are a critical technology, and the US is far behind China. There are strong bipartisan political tailwinds to support the local drone industry and counter China. The huge vacuum left by Chinese drone bans will be filled by opportunistic local companies.
Five picks to bet on this trend
This is the crux of the exercise. It's not enough to identify the right trend, we also need to select the investments that can translate into meaningful alpha.
There are several approaches here. Take a shotgun approach and invest in many drone companies. You probably know by now that I usually dislike ETFs and prefer to concentrate my bets.
I have compiled a list of the top drone producers in the U.S. and Canada. See the table below for reference. I have included private companies as well, in case some do an IPO in the next couple of months.
For my investment style and risk tolerance, I’m looking for high-beta stocks with volatile outcomes, which usually means companies with:
Small/mid-market caps.
High exposure to drones.
Still undervalued (upside is still not fully recognized by the average market participant).
In addition, I want companies that:
Show possible defensible MOATs.
Have a promising history of execution.
Strong leadership/team.
Finally, I want to try to spread my investments on drone companies that have different core focus and key differentiators. Here are some possible dimensions:
Components v.s. High-end assembled drone.
Software & AI v.s. Hardware
Civilian v.s. Military
Premium v.s. Value (high-end drone/parts, versus mass expandable ones)
From the above list, I have shortlisted 5 ideas that may fit those criteria, while keeping others on the radar.
Buying at the right price is always a requisite, and I won’t enter any trade without believing its great risk/reward. To determine my entry prices, I rely purely on TA analysis.
1) Kraken Robotics (KRKNF): Undersea drones.
Kraken is Canadian marine technology company that specializes in subsea intelligence. They supply Anduril. They build the high-tech sensors, software, and underwater robots used to map the ocean floor and inspect underwater infrastructure with extreme precision. They serve both military and commercial (offshore energy) sectors.
Unlike traditional sonar, Kraken’s SAS technology provides ultra-high-resolution images of the seabed, making it much easier to identify small objects like shipwrecks, pipelines, or underwater mines.
They manufacture pressure-tolerant deep-sea batteries. These are designed to provide long-lasting power for Autonomous Underwater Vehicles (AUVs) that operate in the crushing depths of the ocean.
They continue to secure large-scale military orders, including a recent $24 million order in mid-March 2026.
Growth prospects
Kraken has expanded from a Canadian-centric firm to a global operation with 12 facilities across four continents and a workforce of 1,200.
Originally a secondary product, subsea batteries have become a primary revenue driver. Demand is surging as militaries and offshore energy firms move toward larger, long-endurance AUVs.
Their imaging technology, the Synthetic Aperture Sonar (SAS), is becoming the standard for modern mine-hunting and subsea infrastructure protection.
Trading Notes
Mcap: $2B.
I like the underwater focus of the company for my portfolio. The price has already surged a lot however, and I will be looking for an entry below $4.
2) Unusual Machines (UMAC) : The picks and shovels for the drone thesis: low-cost components produced in the US.
Unusual Machine focuses on building the parts (“the guts”) used by the drone manufacturers. As such, they can be seen as a pick and shovel for the US drone trend. They carved out a niche as a supplier of the critical parts (ie, goggles, controllers, and motors) that make drones functional for both hobbyists and military operators. These motors are specifically designed to replace Chinese-made components in military and enterprise drones. They operate high-volume motor manufacturing facilities in Orlando, Florida, and are expanding their manufacturing capacity.
Unusual Machines positions itself as a “Value” part manufacturer.
Slide from Unusual Machine investor deck
In mid-March 2026, the company completed a $150 million public offering to fund the scale-up of their manufacturing.
Growth prospects
The looming ban on foreign drone components is forcing U.S. manufacturers to switch to NDAA-compliant suppliers such as Unusual Machine, which is the main bullish narrative for this company.
The management also indicated an order of 20,000 components for the U.S. Army in 2026, and aims to become cash-flow positive by the end of 2026.
Political ties
The involvement of the current administration (Donald Trump Jr.) in the board and as an investor could be seen as a double-edged sword. It could help the company secure DoD/DoW contracts in the short term. If there is an admin change, could that affect the company's prospects? I don’t think so, but it’s something to keep monitoring.
Investments in other companies
The CEO Allan Evans started a “Drone Treasury Company” with the intent to invest in other drone companies that might buy their parts. This could be a very smart strategy as Unusual machine stands to benefits from the growth of the whole drone ecosystem.
Current UMAC investments, from filings.
Risks
The main risk is whether the company can execute. There is a clear opportunity for a US drone part manufacturer, but there will also be emerging competition.
There is a political risk as well that affects the entire drone thesis.
Trading Notes
At a current market cap of ~ $500m, I have been a buyer under $15. Lack of execution and growing competition is what I view as the main risk, so I will be monitoring in the upcoming month how the company delivers on their goals.
3) Swarmer (SWRM): AI software for autonomous drone swarms
Unlike hardware manufacturers, Swarmer is a software-first company. Their goal is to provide the intelligence layer that allows a single human operator to manage hundreds of drones at once across air, land, and sea.
Their software has reportedly been used in over 100,000 combat missions in Ukraine.
Growth prospects
Unlike other drones picks, Swarmer doesn’t have the overhead of factories or supply chain issues, which allows them to scale rapidly.
Swarmer is positioning itself as a key software provider for the Pentagon's $1.1 billion Drone Dominance Program. Their software specifically solves the one-to-many problem (one operator controlling many drones).
The company has a firm $16.3 million backlog and an additional $16.8 million in anticipated revenue (MOUs).
Trading Notes
Current market-cap: ~500m$
They already surged a lot after the IPO (+1000%), so I’m not in a hurry to buy, but it’s an interesting pure-play AI software drone company to watch. No buying price target yet.
4) AeroVironment (AVAV): Diversified titan in the defense industry.
AeroVironment was long known for pioneering the small, hand-launched drones used by the U.S. military; they have now expanded into a full-spectrum defense technology power, with Small UAS, lasers, and platforms.
The company is a primary beneficiary of the Pentagon’s Replicator initiative, which aims to deploy thousands of low-cost, smart autonomous systems to counter major adversaries.
Growth prospects
Management recently outlined a 5-year strategic plan to grow revenue from its current $2 billion level to $5 billion, by shifting from a specialized military contractor to a commercial-scale defense tech powerhouse.
The company aims to return to 18% EBITDA margins by 2027 as they commercialize their acquired tech following the BlueHalo merger.
The opening of a FreedomWerx facility in Salt Lake City in early 2027 will triple the Switchblade production capacity.
Their Laser Weapons (Laser Oriented Counter UAS System) are moving from the testing phase to full product adoption, with expectation of large-scale adoption by FY2027.
Trading Notes
The company already have a large market-cap of ~9B, and is not as high-beta as the other stocks. But they are well diversified. I’m could be interested to increase my position to a full size position below $160.
5) Redwire (RDW): Diversified aerospace and defense player
Redwire now has significant exposure to the drone market, which now represents nearly half of its quarterly revenue and serves as its primary growth engine. This shift occurred in June 2025 through the $925 million acquisition of Edge Autonomy. That move transformed Redwire from a pure-play space infrastructure company into a diversified aerospace and defense player.
The company is positioned to benefit from the Pentagon's Replicator program, which aims to field thousands of low-cost autonomous systems.
Their drones are already on the DIU Blue UAS Cleared List, making them a pre-approved choice for government agencies looking to move away from Chinese-made components.
Growth prospects
Since acquiring Edge Autonomy in mid-2025, Redwire has delivered over 100 Stalker/Penguin UAS units to 7 countries. Their new 85,000 sq. ft. facility in Michigan is now online, specifically to mass-produce fuel cells and components for these drones
Redwire entered 2026 with a record contracted backlog of $411.2 million, providing high visibility for their near-term growth.
Redwire is a leader in the emerging domain of VLEO (Very Low Earth Orbit). They recently secured a $44 million DARPA contract for the Otter mission.
Trading Notes
Current marketcap: ~1.6B$
The market is currentlyfocused on whether Redwire can finally turn their growth into consistent profit.
I like the fact that the company is diversified in both space infrastructure and defense. I have been a buyer below $7.
For reference, an aggregated list of US drone companies, public and private.
Company
Ticker
Status
Est. Market Cap / Valuation
Drone Exposure
Core Focus
Customers
Key Differentiator
Layer
AeroVironment
AVAV
Public
~$8–10B
Very High
Tactical military drones
DoD, allies
Combat-proven (Switchblade)
Hardware (Defense)
Red Cat Holdings
RCAT
Public
~$300–600M
Very High
Military drone systems
DoD
Modular + NDAA compliant
Hardware + Systems
Kratos Defense & Security Solutions
KTOS
Public
~$4–6B
High
Attritable drones
Pentagon
Low-cost mass deployment
Hardware (Defense)
Draganfly
DPRO
Public
~$50–150M
High
Drone platforms + services
Govt, public safety
Long-standing UAV vendor
Hardware + Services
Unusual Machines
UMAC
Public
~$100–300M
High
NDAA-compliant components
OEMs, defense
Domestic supply chain
Components
Swarmer
SWMR
Public
~$300–400M
Very High
Swarm autonomy software
Military
Multi-drone coordination
AI / Autonomy
Ondas Holdings
ONDS
Public
~$100–300M
High
Industrial + defense drones
Rail, defense
Drone + wireless infra
Systems + Infra
AgEagle Aerial Systems
UAVS
Public
~$50–150M
High
Enterprise drones + data
Agriculture
Analytics positioning
Hardware + Data
Workhorse Group
WKHS
Public
~$100–300M
Medium
Delivery drones
Logistics
Last-mile integration
Hardware (Commercial)
Safe Pro Group
SPAI
Public
~$50–150M
Medium
AI image analysis (ISR)
Defense
Mine detection AI
AI / Data
Ambarella
AMBA
Public
~$2–4B
Indirect
AI vision chips
OEMs
Edge AI leader
Components
Teledyne Technologies
TDY
Public
~$20–25B
Medium
Sensors + FLIR drones
Defense, industrial
Thermal + ISR dominance
Components + Systems
Trimble
TRMB
Public
~$10–15B
Low–Medium
Mapping + geospatial
Construction
Workflow integration
Application / Data
Redwire
RDW
Public
~$500M–1B
Medium
Space + autonomy
NASA, defense
Cross-domain autonomy
Systems
L3Harris Technologies
LHX
Public
~$35–45B
Medium
ISR + drone systems
Pentagon
Deep defense integration
Systems (Defense)
Textron
TXT
Public
~$15–20B
Medium
Military UAVs
Military
Established OEM
Hardware (Defense)
Kraken Robotics
KRKNF
Public
~$1-2B
Very High
Undersea intelligence/robots
Military, Commercial (Offshore Energy)
SAS technology + Deep-sea batteries
Systems + Components
Skydio
—
Private
~$2–3B
Very High
Autonomous drones
Enterprise, defense
Best-in-class autonomy
Hardware + AI
Anduril Industries
—
Private
~$10–15B+
Very High
Defense + AI systems
DoD
Full-stack OS (Lattice)
Systems + AI
Shield AI
—
Private
~$2–4B
Very High
Autonomous flight AI
Military
GPS-denied autonomy
AI (Core)
Zipline
—
Private
~$4–5B
High
Drone delivery
Healthcare
Real-world scale ops
Application
Conclusion
While I didn’t do a deep analysis of each drone pick, I wanted to provide an introduction to the drone investing landscape, and this article is already long. I think many companies can reach attractive prices on this S&P pullback. I’ll continue to research this theme and will add anything I find useful to my investing journal, including new trades.
Disclosure: I’m long AVAV, UMAC, RDW, and may initiate a position later in KRKNF, SWRM, and other listed drones.
Do you agree or disagree with the thesis? What do you think are the best ways to play this theme? Let me know in the comments.
