Drone Shares Surge After Trump Grounds Major Defense Contractors

Trump’s Defense Sector Shakeup Sends Stocks on Wild Ride

On Wednesday, former President Donald Trump sparked significant volatility in defense sector stocks after calling for a complete halt on share buybacks and dividends until supply chain challenges are addressed. He further fueled market reactions by suggesting a 50% boost to the military budget for 2027.

Manufacturers specializing in drones and autonomous technologies saw their shares climb, benefiting from both Trump’s criticism of major defense contractors and his ambitious military spending proposal.

• RCAT shares are surging.

Trump’s Tough Stance on Major Defense Firms

Through a series of social media statements, Trump criticized the slow pace of military production, highlighting the billions funneled to shareholders while essential programs remain delayed for years.

• Strict Conditions: Defense companies that fail to meet rigorous production and maintenance standards would be barred from issuing dividends or repurchasing stock.
• Executive Pay Limits: Trump also floated a $5 million ceiling on executive compensation for companies not meeting performance targets, insisting that funds be redirected toward building “NEW and MODERN Production Plants.”
• Stock Market Reaction: Following these announcements, shares of Lockheed Martin, Northrop Grumman, RTX, and General Dynamics dropped between 4% and 6%. However, these losses were later recouped after Trump’s proposal for increased military funding.

Proposed $1.5 Trillion Defense Budget

Trump capped his remarks by advocating for a dramatic increase in military spending, suggesting the 2027 defense budget should reach $1.5 trillion—half a trillion more than previously planned.

“For the safety and security of our nation, especially in these challenging and dangerous times, I believe our 2027 military budget should be $1.5 trillion, not just $1 trillion,” Trump stated in his post.

Drone and Autonomous Tech Stocks Rally

Investors responded enthusiastically to Trump’s comments, driving up shares of companies focused on drones and autonomous systems. Both the push for decentralized manufacturing and the promise of increased defense spending were seen as major tailwinds for these firms.

Several pure-play drone companies experienced double-digit gains within a day of Trump’s announcements:

The message is clear: Trump’s vision emphasizes a distributed, American-based defense manufacturing sector capable of rapidly producing advanced weaponry.

For agile companies like Red Cat, Kratos, and AeroVironment—unburdened by the bureaucracy and dividend obligations of larger defense contractors—the opportunity to secure major Pentagon contracts appears more promising than ever.

Image credit: Shutterstock

Stock Highlights

• Red Cat Holdings Inc (RCAT): $11.65 (+11.5%)
• AeroVironment Inc (AVAV): $340.09 (+6.79%)
• Draganfly Inc (DPRO): $9.09 (+9.69%)
• General Dynamics Corp (GD): $354.13 (+2.46%)
• Kratos Defense & Security Solutions Inc (KTOS): $105.02 (+14.8%)
• Lockheed Martin Corp (LMT): $519.26 (+4.51%)
• Northrop Grumman Corp (NOC): $596.55 (+3.39%)
• Ondas Holdings Inc (ONDS): $13.88 (+13.9%)
• RTX Corp (RTX): $186.63 (+0.48%)
• AgEagle Aerial Systems Inc (UAVS): $1.82 (+51.7%)