Potential Pentagon Investments Propel Drone Manufacturers Skyward

As talks to end the Iran War drag on, the Pentagon is planning to make deals with upstart US drone companies, the WSJ reported. The deals would tap into the Pentagon’s pool of $210 billion in lending power and could include equity stakes for the US government. The Pentagon’s reportedly eyeing companies including Performance Drone Works, Neros Technologies and Unusual Machines. 

The Defense Department bucketed the news into “pre-decisional matters.” But like any suspected soft launch, people who thought they spied the Pentagon’s hand in the drone industry’s picture jumped to conclusions.

Unusual Machines, which counts Donald Trump Jr. as an advisory board member and shareholder (cue potential scrutiny), saw its stock jump more than 60% from Wednesday to Thursday’s close. Other drone-maker stocks also surged. 

The Drone War

Iran’s small and low-cost drones have defined the current war. The US can’t swat down the thousands of kamikaze drones fast enough as Iran rapidly rebuilds its arsenal, and each interceptor missile used in the attempt costs millions.

To close the gap, the US is fast-tracking production of smaller and cheaper drones to rival Iran’s:

• The Pentagon’s new deals with the drone sector are said to focus on upping production and lowering costs, which could speed the US toward its production goals.
• Drones were a noted priority in President Trump’s growing defense budget, and the Pentagon aims to build up an arsenal of 300,000 cheaper attack drones by the end of next year as part of its $1.1 billion Drone Dominance Program. Unusual Machines already has orders on the books for 3,500 drone motors for the US Army in a deal that could see orders rise to 20,000 components this year. 

Clipped Wings: The Pentagon has been slow to invest in drones, stifling the sector’s ability to ramp up in the US. Now, it’s playing catch-up. Pentagon sales accounted for 2% of all drone-system sales annually in the US before Trump started his second term — a number that’s likely to jump. The defense department has also requested a budget hike for its drone-developing initiative, the Defense Autonomous Warfare Group, a.k.a. DAWG, from about $225 million this year to more than $54 billion.