3 Defense ETFs with High Exposure to Battle Drones

As modern warfare continues to evolve, drones are becoming one of the most important tools on the battlefield. In Ukraine, for instance, new interceptor drones are now being used to destroy incoming attack drones, which is beginning to change the economics of air defense. Traditionally, defending against aerial threats required expensive missile systems that can cost hundreds of thousands or millions of dollars per launch. However, interceptor drones can now eliminate targets for only a few thousand dollars.

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As a result, Ukraine has been able to counter large waves of Russian drones much more cheaply and shift the cost advantage toward defense. This shift is especially important because modern conflicts increasingly rely on large numbers of low-cost drones. For example, Iranian-designed attack drones used in Ukraine and the Middle East can overwhelm traditional air defense systems if defenders rely only on expensive missiles.

Consequently, as drone warfare continues to develop, both drones and counter-drone technologies are likely to play a much larger role in future military strategies and defense budgets. And as drones become more widely used in warfare, investors are also looking for ways to gain exposure to the companies developing these technologies. Interestingly, several defense ETFs already focus heavily on drone and autonomous warfare systems.

**1. Defiance Drone & Modern Warfare ETF JEDI -2.97% ▼ **

This ETF focuses specifically on companies involved in military drones, autonomous systems, AI-driven warfare, and defense robotics. Because of that focus, it offers one of the most direct ways to invest in the growing drone warfare sector.

**2. REX Drone ETF DRNZ +0.23% ▲ **

The DRNZ ETF targets companies that generate a meaningful portion of their revenue from unmanned aerial vehicles and related technologies. As governments and militaries continue to increase their investments in drones and counter-drone systems, the companies in this ETF could see stronger demand for their technologies.

**3. ARK Autonomous Technology & Robotics ETF ARKQ -1.48% ▼ **

While not a pure drone ETF, ARKQ invests heavily in autonomous systems, robotics, and aerospace technologies, which include several drone-related companies such as AeroVironment AVAV -2.61% ▼ and other unmanned systems providers. This provides a more diversified way to gain exposure to the growing drone ecosystem.

Which Defense ETF Is the Better Buy?

Turning to Wall Street, out of the three ETFs mentioned above, analysts think that DRNZ has the most room to run. In fact, DRNZ’s price target of $34.73 per share implies almost 33% upside potential.

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