The drone revolution can add some healthy buzz to your portfolio. While commercial drones are delivering on their promised potential, global defense budgets are surging, and Washington is shoveling billions into unmanned systems. Buying the SPDR S&P Aerospace & Defense ETF (XAR) is one way to capitalize, observes Sean Brodrick, editor at Weiss Ratings Daily.
While the commercial drone market is growing at about 7.3% per year, the defense-sector drone market is growing at 11% per year. Recently, we saw the White House’s FY 2026 discretionary budget request allocate $1.01 trillion for defense spending, a 13% increase over 2025 levels.
(Editor’s Note: Sean is speaking at the 2025 MoneyShow/TradersEXPO Orlando, scheduled for Oct. 16-18. Click HERE to register.)
Washington is pouring billions into the technologies that will define the next decade of warfighting, including drones. That is what is helping the military drone market take wing. The US is 39% of the military drone market — for now — and the race is on as various powers vie to be “top gun” when it comes to military drones.
What’s driving the surge?
- AI autonomy: Next-gen drones are taking off, navigating and executing missions with minimal human oversight.
- Swarm tactics: Networked drones that fly in formation to overwhelm defenses have proved terrifyingly effective and are moving from lab demos into procurement pipelines.
- New thinking on designs: The Pentagon wants cheap, expendable kamikaze drones by the thousands. This is a direct lesson pulled from Ukraine’s battlefield.
- Counter-Unmanned Aircraft Systems: In other words, these technologies and programs are designed to detect and neutralize hostile drones.
- Domestic production: Tariffs and procurement rules now box out foreign suppliers. If it’s not American-made, it doesn't make the cut.
XAR is a way to play this trend. After breaking out in April, XAR rose 25% before taking a breather. It’s now breaking out again — and who knows how high it will go? XAR holds a basket of defense and aerospace stocks.
Recommended Action: Buy XAR.
