NATO’s latest push to strengthen its drone and counter-drone capabilities is shining a spotlight on a fast-growing corner of the defense industry—and the ETFs positioned to benefit. The alliance recently unveiled a new initiative aimed at making NATO “drone-ready,” with member nations expected to invest more than $40 billion in counter-drone capabilities over the next five years, underscoring how autonomous systems have become central to modern warfare.
Specialized funds such as the REX Drone ETF (NASDAQ:DRNZ) and Defiance Drone and Modern Warfare ETF (NYSE:JEDI) provide targeted exposure to companies developing military drones, autonomous systems, defense software, sensors and electronic warfare technologies. Although the funds have lacked momentum so fat this year, the growing investments in the space may provide a much-needed impetus.
Meanwhile, after languishing for most of this year, broader aerospace and defense ETFs, including the iShares U.S. Aerospace & Defense ETF (BATS:ITA) and SPDR S&P Aerospace & Defense ETF (NYSE:XAR), may also get a tailwind as established defense contractors win contracts tied to drone integration and counter-drone systems. The funds hold shares of names like General Electric Co (NYSE:GE), Lockheed Martin Corp (NYSE:LMT), and Rtx Corp (NYSE:RTX). While ITA tracks the Dow Jones U.S. Select Aerospace & Defense Index, XAR follows the S&P Aerospace & Defense Select Industry Index.
