The defense investing playbook is getting rewritten. However, portfolios built around legacy names like Lockheed Martin Corp. (LMT) miss the shift toward autonomous systems and next-generation warfare technology reshaping Pentagon priorities.
The REX Drone ETF (DRNZ) posted a 120.1% return over the past year as government spending pivots toward mass-produced autonomous drones, according to VettaFi Drone Index data. The fund tracks 41 companies across drone manufacturing and enabling technologies, capitalizing on a budgetary sea change that allocated $54 billion to the Trump administration’s Defense Autonomous War Group program — up from $225 million the previous year.
Bill Birmingham, managing director at REX Shares, outlined four distinct demand drivers for the drone economy during a Q2 Market Outlook Symposium session hosted by Cinthia Murphy, director of research at VettaFi. The pillars include offensive military operations, counter-drone systems, commercial applications, and passenger services.
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The addressable market for counter-drone systems alone includes 6,000-6,500 critical infrastructure sites, Birmingham said. Additionally, 3,000 major global airports, and 110,000 commercial ships. Meanwhile, the upcoming World Cup is driving government scrambling for site security.
Regulatory Shift Powers Drone ETF Growth
A June 2025 executive order titled “Unleashing American Drone Dominance” directed the FAA to overhaul restrictive pilot frameworks, Birmingham said. The transition to Beyond Visual Line of Sight rules replaces restrictive pilot frameworks with flight coordinators and corridors of operation. New rules expand the addressable geography from roughly 1.5 square miles to 320 square miles — a 200-fold increase in coverage.
Commercial applications span agriculture for crop protection, industrial safety including wind turbine inspection, and mining operations, Birmingham added. These use cases will likely drive growth over the next decade as the regulatory environment evolves.
The VettaFi Drone Index returned 14.3% year-to-date and 5.1% over the past months, according to ETF Database data. Top holdings include Ondas Inc. (ONDS) at 11.3%, AeroVironment, Inc. (AVAV) at 11.3%, and DroneShield Limited (DRO:ASX) at 6.6%.
Looking ahead, Grand View Research projects the global drone market will exceed $163 billion by 2030 with a compound annual growth rate of 14.3%. Birmingham called the category “durable” and “high growth,” projecting potential returns in the mid-teens to low twenties over the next decade as commercial use cases expand.
View various clips from the Symposium here.
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VettaFi LLC (“VettaFi”) is the index provider for DRNZ, for which it receives an index licensing fee. However, DRNZ is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of DRNZ.
