The Trump administration is in active talks to provide direct financial support to several U.S. drone companies, according to a report by The Wall Street Journal. The potential deals, which could include a mix of debt and equity, would give the U.S. government ownership stakes in some manufacturers and aim to rapidly scale domestic production while driving down costs.
At the center of this effort is the Pentagon's Drone Dominance program, a $1.1 billion initiative to build a stockpile of roughly 300,000 low-cost attack drones by the end of 2027. Current U.S. production capacity stands at about 100,000 drones per year, and many American-made drones cost well above the Pentagon's target price of around $5,000 each. The funding talks are designed to bridge that gap.
Companies named as potential funding recipients include Performance Drone Works, which holds an Army reconnaissance drone contract, Sequoia Capital-backed Neros Technologies, and drone parts supplier Unusual Machines (which counts Donald Trump Jr. as a shareholder and advisory board member). Unusual Machines also announced its partner Powerus was selected for Phase II of the Drone Dominance Program.
Drone stocks moved sharply on the news. Unusual Machines surged 33%, Red Cat Holdings gained 13%, Kratos Defense rose 8.4%, AeroVironment climbed nearly 8%, and Ondas Holdings added over 9%. Red Cat builds small battlefield surveillance drones and has been scaling production of its Black Widow drone with AI features. Kratos makes larger autonomous combat aircraft like the XQ-58A Valkyrie. Ondas Holdings recently completed a $196.6 million all-stock acquisition of defense software firm Omnisys, expanding beyond drone hardware into military software systems.
Separately, AeroVironment received a $20.2 million government-backed investment to expand its Huntsville, Alabama facility for counter-drone missile production. However, the company faces headwinds from a recent earnings miss—posting $0.64 EPS on $408.05 million revenue versus expectations of $0.68 and $487.94 million—and ongoing securities-fraud lawsuits. Its stock remains well off its 52-week high of $417.86, trading around $181.28.
The Pentagon's drone division, the Defense Autonomous Warfare Group, has requested over $54 billion for its drone efforts, a massive increase from the current $225 million annual budget. Before President Trump's second term, Pentagon drone purchases represented less than 2% of all U.S. commercial and government drone sales annually.
