US Army is ordered to report into the drone age

The US Army, the world’s most heavily funded and technologically advanced ground force with an annual budget of around $185 billion, has been ordered to report for duty into the drone age. Long-range missiles and 3D printing are in; Humvees and manned aircraft are on the outs. 

“To build a leaner, more lethal force, the Army must transform at an accelerated pace by divesting outdated, redundant, and inefficient programs,” Defense Secretary Pete Hegseth said in a memo to senior leaders at the Pentagon late last month in which he laid out a transformation strategy that’s full of buzzwords like “AI-driven command,” “counter-UAS mobility” and “electromagnetic and air-littoral dominance.”

“Deterring war, and if required, winning on the rapidly evolving battlefield requires Soldiers who are physically and mentally resilient, rigorously trained, and equipped with the best technology available,” he added.

While it sounds like something right out of a science fiction film, at the heart of the tech-heavy plan is the goal to rule over the airspace and wireless spectrum between the Earth’s surface and around 10,000 feet up. It’s below altitudes where Air Force fighter jets would typically operate, but—with the advent of drones being deployed in conflicts including the Russo-Ukrainian War—the area is increasingly the new front where armies wage modern warfare.

Hegseth aims to achieve much of the transformation by 2027, highlighting how fast he wants to move. The Wall Street Journal reported that the overhaul—the largest since the Cold War—will cost $36 billion. Unmanned aircraft could be used to carry supplies in addition to surveillance and attack purposes. 

Hype cycle

Companies that make specialized drone technology for defense purposes have seen shares rise with the prospect of a boom in US military spending. Textron (NYSE: TXT)—which specializes in unmanned aircraft systems—gained 13.9% over the past month, while AeroVironment (NASDAQ: AVAV) surged 16.7% and Axon Enterprise (NASDAQ: AXON) rose 20.4%. Smaller firms that make related systems and software like BigBear.ai (NYSE: BBAI) and Kratos Defense & Security Solutions (NASDAQ: KTOS) have seen big spikes over the past year.

Still, the sector is volatile, and many US startups seeking lucrative government contracts have faced setbacks when their technology is actually deployed on the battlefield. James Rogers, executive director of Cornell University’s Tech Policy Institute, said that the real challenge ahead will be to develop beyond the hype and focus on drones that can actually be activated in US force deployment compared to existing capabilities like precision-guided munitions and long-range artillery. There will be a lot of noise to filter out, in other words. 

“Ukraine’s war offered a proof of concept: cheap, networked drones can disrupt expensive platforms and reshape battlefield awareness with far less risk than manned systems,” Sarah Kreps, a professor of government and law at Cornell, echoed, adding that the new US plans may be easier imagined than done. 

“Ukraine’s effectiveness came from improvisation, asymmetry, and deep civilian tech integration—factors that don’t map neatly onto the US military,” she continued. “The real fight may be internal—between entrenched interests and organizational culture and the pressure to modernize.”

Global arms race

The global drone market—valued at $48 billion last year—is expected to grow nearly 12.5% a year and hit $123 billion by 2032. But behind the lofty projections and big, speedy plans is the fact the US is well behind the competition and has a lot of catching up to do. China’s military has been rapidly deploying AI-powered drones, with state television there last month heralding a “micro-drone” that weighs less than a kilogram. The China Aerospace Studies Institute—a US Department of the Air Force think tank—used a recent paper to document how the Asian giant was developing swarm technology that first manifested in commercial light shows before quickly being adapted for military purposes.

“China’s drone output in 2024 was $29.4 billion, at least four times the amount of money that the United States is spending, with far lower, by an order of magnitude, unit costs,” North Carolina Representative Pat Harrigan—a member of the House Armed Services Committee—said last month, noting the hazards being posed by small unmanned aircraft systems.

“We’ve come to a point where we have $2,500 drones that are truly threatening multi-100 million, if not billion dollar assets,” he added. That means that it’s not just the business around building American drones that could be set to explode, but also the one that’s springing up to detect and destroy the tech being developed by potentially hostile forces.

The simmering competition for drone domination is only in its infancy, and investors have unique access to all the action because of the sheer number of startups and boutique firms involved in the sector that’s fusing kinetic warfare with silicon and code. There’s nothing like a global arms race to get the money flowing.