The renewed investor interest follows NATO’s announcement of the $40 billion investment in counter-drone capabilities. Germany has also backed a 90-million-euro contract to supply 50,000 AI-enabled drones to Ukraine, while the U.K. has committed billions toward drone and counter-drone programs. The surge in spending comes as military planners increasingly view drones as essential battlefield assets rather than niche weapons.
ETFs to Watch
REX Drone ETF (DRNZ)
Defiance Drone and Modern Warfare ETF (JEDI)
JEDI tracks the BITA Drone & Modern Warfare Select Index, investing in companies that derive significant revenue from drone technology and modern defense systems. The ETF extends beyond drone manufacturers to include firms involved in autonomous weapons, AI, defense software and electronic warfare, providing broader exposure to next-generation military technologies. It carries an expense ratio of 0.69%.
iShares U.S. Aerospace & Defense ETF (ITA)
ITA provides diversified exposure to major U.S. defense contractors, many of which are investing heavily in unmanned aircraft, missile defense, electronic warfare and military communications. While less concentrated than DRNZ or JEDI, the fund could benefit as NATO members increase procurement of integrated drone and counter-drone systems.
SPDR S&P Aerospace & Defense ETF (XAR)
XAR’s equal-weighted approach gives investors exposure to a wider range of aerospace and defense companies, including mid-cap suppliers developing military electronics, autonomous systems and aerospace components. The structure reduces concentration in the industry’s largest contractors while increasing exposure to companies that could emerge as key suppliers in the drone value chain.
The Bottom Line
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