Key Takeaways:
- US government is negotiating funding for American drone manufacturers
- Unusual Machines surged 11%, Red Cat Holdings 7%, Ondas 3% after-hours
- FCC foreign drone ban and Pentagon procurement needs drive domestic push
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US government in talks to fund drone makers, stocks surge 11%
The US government is negotiating funding for American drone manufacturers, sending shares of three publicly traded drone companies higher in after-hours trading as investors bet on a wave of defense and public safety contracts.
The US government is in talks to fund American drone manufacturers, sending shares of Unusual Machines up 11 percent and Red Cat Holdings 7 percent higher in after-hours trading on May 28. Ondas Holdings gained 3 percent. The discussions come as the Pentagon and federal agencies seek to expand domestic drone production capacity amid national security concerns over foreign-made systems.
"The government is signaling a strategic pivot toward domestic sourcing for unmanned systems, which could unlock hundreds of millions in contract value for these companies," said a person familiar with the discussions. The talks span multiple agencies and include potential funding for research, development, and manufacturing scale-up of American-made drones and critical components.
The funding push follows the FCC's December 2025 decision to add all foreign-produced drones and critical components to its Covered List, effectively banning them from US networks. The rule, which took effect after a National Security Determination from an executive branch interagency body, broadly applies to any drone system or key component manufactured outside the United States. The FCC has since granted conditional approvals to a growing list of manufacturers — including SiFly Aviation, ScoutDI, and Elevon Aerial — through December 31, 2026, but the regulatory environment has created a supply gap that domestic manufacturers are positioned to fill.
The Pentagon's Drone Procurement Push
The Department of War has been actively expanding its drone capabilities. The military's Low-cost Uncrewed Combat Attack System, or LUCAS, built by defense contractor Spektreworks, costs about $35,000 per drone and has been deployed in the Middle East. The Pentagon is also considering an additional purchase of more than 3,500 Starshield terminal subscriptions from SpaceX, a deal that could generate hundreds of millions of dollars in annual revenue, according to Pentagon documents reviewed by Reuters.
At the same time, domestic law enforcement agencies are accelerating drone adoption. The Metro Nashville Police Department launched a 30-to-45-day drone pilot program in May 2026 using Skydio equipment, testing the technology for active investigations, missing person cases, and major crash response. Councilmembers in Nashville have signaled support for expanding the program beyond the initial trial.
What the Funding Means for Drone Stocks
Unusual Machines, Red Cat Holdings, and Ondas represent a small but growing cohort of publicly traded US drone manufacturers that could benefit directly from federal funding. Red Cat Holdings has focused on military-grade small drones, while Unusual Machines and Ondas target industrial and defense applications. The after-hours surge — Unusual Machines leading at 11 percent — reflects investor expectations that government contracts could transform revenue profiles for companies that have historically relied on commercial and consumer sales.
The funding talks also come as the Pentagon explicitly seeks alternatives to SpaceX's Starlink for military communications. The Department of War said it is "committed to fostering a competitive environment for commercial satellite communications" and is "actively engaging with industry to identify innovative solutions and new entrants," according to a statement provided to Ars Technica. The Space Force's Commercial Satellite Communications Office is working on additional options with other proliferated low Earth orbit partners.
For investors, the key question is whether the funding materializes as grants, contracts, or equity investments — and how quickly. The Pentagon's existing procurement timelines suggest that even accelerated funding would take quarters to flow through to revenue. Unusual Machines, trading on the after-hours surge, now carries expectations that will need to be met with concrete contract announcements.
This article is for informational purposes only and does not constitute investment advice.
