U.S. drone stocks are flying high after Defense Secretary Pete Hegseth said he’s fully committed to “unleashing American drone dominance.”

Hegseth confirmed plans of “rescinding restrictive policies” to boost manufacturing and accelerate the use of unmanned systems for military purposes in a video recorded at the Pentagon on Friday. 

Shares of AeroVironment (AVAV) and Kratos Defense (KTOS) rallied more than 10% each, while their smaller peer, Red Cat (RCAT) soared over 20% today.

What Hegseth’s Remarks Mean for Drone Stocks

Defense Secretary Pete Hegseth has reportedly instructed the Pentagon to treat drones as “cheap, rapidly replaceable” munitions – removing bureaucratic bottlenecks and accelerating battlefield deployment. 

Moving forward, commanders will have the authority to directly procure and test unmanned aerial systems (UAS), including 3D-printed prototypes, bypassing legacy approval processes. 

This fast-track integration of drone technology into combat and training programs will likely boost demand for domestic suppliers. 

For drone stocks, including AVAV, KTOS, and RCAT, this means increased orders, faster revenue cycles, and a front-row seat to a multi-year defense-tech boom. 

How AVAV, RCAT, and KTOS Are Fueling US Drone Ambitions

Investors should consider building a position in the aforementioned three drone stocks following Hegseth’s statement as each stands to play a central role in the American drone supremacy. 

AeroVironment is a leading supplier of tactical drones and loitering munitions to the U.S. military. Its flagship products like Switchblade and Puma systems have been widely deployed in Ukraine and are central to battlefield reconnaissance and precision strikes.

Kratos specializes in high-performance, jet-powered tactical drones such as the XQ-58A Valkyrie, designed for manned-unmanned teaming and autonomous combat missions. Its drones are built for affordability, survivability, and rapid deployment in contested environments.

Red Cat Holdings develops low-cost, portable ISR and precision strike drones through its Teal and FlightWave subsidiaries. Its Black Widow drone won the U.S. Army’s Short Range Reconnaissance contract, and its FANG FPV drone is optimized for lethal missions.

Note that Hegseth’s remarks arrive shortly after President Donald Trump signed an executive order in favor of drone technology. 

How Wall Street Recommends Playing Drone Stocks in 2025

U.S. drone stocks are particularly exciting to own following Hegseth’s video as Wall Street has a consensus “Strong Buy” rating on all three. 

However, today’s rally has pushed Kratos well past its mean price target.