Time to Tap Drone ETFs Now?
The growing focus on drones in modern warfare reflects a broader shift in procuring arms and ammunition. AI-enabled drones are now becoming essential for surveillance, precision strikes and battlefield coordination.
Europe Ramps Up Investment in Military Drones
Europe is rapidly accelerating investments in drones and autonomous defense technologies as the Russia-Ukraine war reshapes military priorities. Over the past two weeks alone, NATO unveiled a major drone initiative.
The U.K. committed billions to drone and counter-drone programs, Germany moved to procure 50,000 drones for Ukraine, and defense tech startup Helsing reached an $18 billion valuation, as quoted on CNBC.
Drones Become a Battlefield Essential
Military planners increasingly view drones as a core element of future combat operations rather than niche weapons.
According to Morningstar analyst Loredana Muharremi, future warfare will rely on highly connected platforms where tanks, drones, satellites and unmanned aerial vehicles operate as an integrated network, as quoted on the same CNBC article.
Lessons from the Russia-Ukraine conflict and Iran's use of low-cost Shahed drones have cemented the value of affordable, AI-powered autonomous systems capable of intelligence gathering and precision attacks. Note that the U.S. military said it used one-way attack sea drones for the first time in an attack on an Iranian naval port, per CBS News.
NATO and Europe Step Up Spending
NATO recently announced a new initiative aimed at making the alliance "drone-ready," with members expected to invest more than $40 billion in counter-drone capabilities over the next five years.
Germany is also expanding support for Ukraine. Defense software firm Auterion and Ukrainian drone manufacturer Skyfall secured a 90-million-euro contract to deliver 50,000 drones equipped with Auterion's operating system.
Defense Spending Expands Beyond Drone Makers
The rapid adoption of drones is boosting demand for enabling technologies, including artificial intelligence, secure communications, electronic warfare systems, satellite intelligence, sensors and battlefield management software.
According to Morningstar, companies with exposure to autonomous systems, air defense, software, electronic warfare and space technologies are well positioned to benefit from rising defense budgets, per the same CNBC article.
Defense Tech Funding Surges
Europe's defense spending has doubled since 2019 and could approach €800 billion by 2030 under NATO's long-term spending targets, according to McKinsey, quoted on CNBC.
Private investment is following the same trend. European defense technology funding climbed from roughly €200 million in 2021 to €2.6 billion in 2025.
ETFs to Play
Against this backdrop, below we highlight two ETFs that can be played amid the resurgence of drone usage.
REX Drone ETF DRNZ
The underlying VettaFi Drone Index tracks the performance of a portfolio of global equity securities of companies that are engaged in drone and unmanned aerial vehicles manufacturing and enabling technologies. The fund charges 65 bps in fees.
Defiance Drone and Modern Warfare ETF JEDI
The underlying BITA Drone & Modern Warfare Select Index tracks the performance of companies that are publicly traded on recognized global exchanges in developed markets and generate significant revenues from the drone and modern warfare industry. The fund charges 69 bps in fees.
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Defiance Drone and Modern Warfare ETF (JEDI): ETF Research Reports
REX Drone ETF (DRNZ): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).
Source Zacks-com
