Drone stocks largely held steady on Tuesday as the Nasdaq sold off, with defense-linked companies benefiting from their dependence on government procurement budgets rather than AI infrastructure spending.
The FY 2027 President's Budget allocated $20.6 billion for unmanned aircraft systems and $4.5 billion for autonomous systems development, insulating these names from the semiconductor rout that hit AI hardware stocks.
What happened
Red Cat Holdings closed down 2%, Ondas Holdings finished up 1%, and AeroVironment fell roughly 4% to around $174 on Tuesday as the Nasdaq sold off sharply. The iShares Semiconductor ETF dropped roughly 5%, while the iShares U.S. Aerospace & Defense ETF rose 0.38%.
Why it matters
Drone companies derive revenue from government procurement and defense budgets, not from the AI infrastructure spending that hammered semiconductor stocks. The FY 2027 President's Budget explicitly allocated $20.6 billion for one-way attack and counter small unmanned aircraft systems, plus $4.5 billion for autonomous systems — demand that remains independent of hyperscaler data center investment.
What to watch
AeroVironment, which fell the most, has run 27% over the past month and carries the highest institutional ownership at 88.4%, making it more vulnerable to profit-taking. Red Cat is up roughly 37% over the past month with a reaffirmed FY26 revenue target of $150 million to $180 million; Ondas raised its FY26 revenue target to at least $390 million, roughly 670% growth.
Ask the AI about this article →
Tuesday's market action drew a sharp line between revenue sources in aerospace: companies dependent on government procurement and defense budgets weathered the sell-off, while semiconductor and AI infrastructure stocks cratered. The iShares Semiconductor ETF fell roughly 5%, but the iShares U.S. Aerospace & Defense ETF gained 0.38%, reflecting investor rotation away from the hyperscaler AI capex trade and toward names with steady defense-budget backing. The FY 2027 President's Budget provided concrete evidence of that backing, explicitly carving out $20.6 billion for unmanned aircraft systems and counter-drone programs, plus $4.5 billion for autonomous systems development — a demand curve that does not depend on whether Alphabet, Meta, or Oracle builds another data center.
Within the drone sector, AeroVironment stood out as the vulnerable player, falling roughly 4% to around $174 on what appears to be profit-taking after a 27% run over the past month. Its largest market cap (roughly $9.76 billion) and highest institutional ownership (88.4%) made it more susceptible to broad risk-off flows and institutional trim orders. Red Cat and Ondas, by contrast, maintained momentum: Red Cat closed down just 2% despite the broader rout, supported by 527% year-over-year Q2 revenue growth and a reaffirmed FY26 target, while Ondas gained 1% even after an early post-earnings drop, suggesting sustained investor appetite for small-cap defense-linked growth.
For example, today's edition would include:
AI-summarized, only the topics you pick — one digest a day via Email, Slack, or Discord.
Free · takes 30 seconds · unsubscribe anytimeWhat is AIToday? →
Ask AI anything about this article. Q&As are published on this page for other readers too.
Skild AI has introduced S1, its flagship robot foundation model, which lets robots learn new, complex tasks by…
BHP, the world's largest mining company by market capitalization, has deployed AI across its operations
John Deere announced a three-year, $10 million research and development partnership with ag-tech company Reser…
On July 16, 2026, NVIDIA announced that 22 Japanese companies and organizations have expressed intent to join…
Panasonic HD has established a new AI and robotics research and development division, and CAIO Sakaba is leadi…
Reframe Systems, a robotics company using physical AI to industrialize home construction, has raised $40 milli…
