Pentagon Boosts US Drone Production, AeroVironment Kratos Stocks Surge

Stocks of U.S. drone manufacturers AeroVironment and Kratos Defense & Security Solutions surged over 10% following Defense Secretary Pete Hegseth's announcement to remove restrictive Pentagon policies, aiming to boost domestic drone production and prioritize American-made drones for military use. Hegseth emphasized overcoming bureaucratic obstacles that previously hindered procurement and training with low-cost U.S.-made drones, contrasting this with adversaries' mass production of cheap drones. The Pentagon's new directive allows combat units the authority to buy, test, and train with small UAS drones, signaling a strategic shift toward unmanned systems in U.S. defense. Kratos, known for its electronic systems and 'loyal wingman' drones like the Valkyrie, has seen a 10.83% stock jump amidst growing investor optimism despite concerns over high valuation and declining margins. AeroVironment, a leader in small to mid-sized UAVs, also benefited from the policy change and recent acquisition of BlueHalo, though its shares are considered significantly overvalued. Both companies demonstrate strong financial stability and are positioned for growth as the U.S. escalates its investment in drone technologies to counter competitors like China and Russia.