"Only The Beginning": How To Profit From The Asymmetric Warfare Boom

Low-cost kamikaze drones are fundamentally reshaping the modern battlefield and forcing militaries to rethink procurement strategies built around expensive, high-end weapons systems.

In the Middle East, US Special Forces learned the hard way that cheap Iranian Shahed-style drones can eliminate multi-million-dollar (if not billion-dollar) communications, radar, and command-and-control nodes.

The result of this Iranian offensive with cheap drones, which exposed a missing air-defense layer over high-value U.S. military communications systems across the Gulf region, will trigger a defense procurement reset. The U.S. military is now racing to source, order, and stockpile low-cost one-way attack drones, interceptors, and counter-UAS systems before the next conflict erupts - or US-Iran ceasefire blows up.

Piper Sandler analyst Clarke Jeffries is now arriving at the same conclusion we have been highlighting:

We anticipate one of the biggest lessons of the 2020s will be how affordable drone technology fundamentally reshaped the modern combat environment and set the stage for a reevaluation of the procurement, organization and strategy of ~$3T in annual global military expenditures.

While drones have existed in the modern military apparatus for decades at this point, it was the Ukraine war (as one of the first near-peer conflicts in recent memory) which provided demonstrable evidence of how specifically lightweight and affordable systems could change the paradigm of combat.

Jeffries provided clients with a detailed overview of the nine public and nineteen private companies powering America's emerging drone industry. His takeaway: this is still the early chapters of a market set for massive growth, as the U.S. military and allied nations push the procurement cycle into higher gear next year and through the end of the decade.

He sees the first wave of the market centered on inexpensive UAS production, domestic supply chains, and rapid procurement, while the second wave will be driven by autonomy, swarming, mothership configurations, and deeper integration into command-and-control networks.

He pointed out that AI software will be as important as hardware, with platforms such as Palantir's Maven Smart System poised to turn massive drone sensor feeds into highly usable battlefield intelligence.

"With most nations averse to endure undue cost to the already punishing economics of pursuing a war, we see proliferation of Group 1-3 UAS as an inevitability and the next major technology inflection point for the aerospace and defense industry," the analyst said.

He continued: 

Democratizing asymmetric warfare; sUAS has redefined the rules of engagement. Much of modern military history has been the story of haves and have-nots, with 10 countries accounting for 72% of global military spend and dominating production of the most capable and exquisite systems. Drone technology however (and specifically small unmanned aircraft systems: sUAS) has vastly increased the accessibility and affordability of highly capable military equipment and subverted the advantage of using exquisite systems into a costly strategy. In Ukraine and Iran, drones of all sizes have become de facto standard for air campaigns launched as low-cost attritable munitions. These drones are regularly countered by more expensive defense methods: missiles, interceptors, rockets creating a challenging cost-exchange issue. Every drone launched is net dollar advantage to the belligerent firing them. With most nations averse to endure undue cost to the already punishing economics of pursuing a war, we see proliferation of Group 1-3 UAS as an inevitability and the next major technology inflection point for the aerospace and defense industry.

Jeffries lays out three key conclusions about the rapidly changing defense landscape:

Public companies flagged by Jeffries as benefiting include AeroVironment, Ondas, Red Cat, AEVEX, Redwire, Insitu and Teledyne FLIR, while private names include Anduril, Skydio, Shield AI, Quantum Systems, Performance Drone Works, DZYNE, Firestorm Labs and Neros.

An example of this technology. Meet DZYNE's BlitzBox system ... 

The American company Dzyne has introduced the BlitzBox system, a container for covertly launching a swarm of attack drones. On the outside, it looks like an ordinary cargo box, but inside, it can hold up to 100 Blitz drones, ready to launch in minutes.#DroneWars #UAS #UAV pic.twitter.com/w9aRaZYrCZ

— Drone Wars (@Drone_Wars_) May 27, 2026

He noted, "Today, most militaries are still in the earliest innings of their sUAS efforts: building defensible supply chains, refining specific designs, aligning the organizational and budgetary structure to successfully field these systems."

Follow the money...

Lessons from the Ukraine & Iranian Conflicts

Notable Drone Programs

Notable UAS Contracts

The UAS Blue List

Past, Present and Future of the Drone Operator

Swarming

Rise of Mothership Drones

In a separate note, Needham analyst Austin Bohlig noted that increasing congressional support for drones and counter-drone technologies has been reflected in the FY27 National Defense Authorization Act and related appropriations bills.

Related:

• JPM Call With Axon Reveals Race To Fortify U.S. Data Centers Against Kamikaze Drone Swarms

• Goldman Sits Down With Anduril As 'War Unicorns' Reshape Defense Tech

• "Flying Beer Cooler": Pentagon's Next Kamikaze Drone Ushers In Era Of Cheap Mass-Produced Airpower

• Congress Moves To Boost Drone Funding As "War Unicorns" See Possible Procurement Supercycle

The safe conclusion is that the public and private drone companies mentioned above are positioned to reap major rewards as military procurement cycles shift toward these low-cost systems and annual global military spending surges in the coming years.

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