ONDS, RCAT, AVAV, UMAC Stocks Slide Overnight: Pentagon’s Drone Push Is Reportedly Facing Major Production Gap

Pentagon official warns about lagging U.S. drone production.

• Defense Innovation Unit COO Travis Metz said the U.S. remains in the early stages of building a large-scale military drone industry. 
• He said the Pentagon's $1.1 billion program could have ordered fewer than 200,000 by February.
• Stricter federal sourcing rules are forcing drone manufacturers to replace foreign components with domestic alternatives.

U.S. drone companies are facing renewed investor concerns after a Pentagon official reportedly acknowledged that the domestic military drone industry remains far behind Ukraine’s wartime production capabilities, raising questions about how quickly U.S. manufacturers can turn major government spending plans into actual production growth.

Drone stocks, including Ondas Holdings (ONDS), Red Cat Holdings (RCAT), AeroVironment (AVAV) and Unusual Machines (UMAC), dropped between 0.7% and nearly 3% overnight, heading into Tuesday. 

U.S. Defense Drone Expansion Hits Manufacturing Roadblocks

According to a report from Reuters, Travis Metz, deputy director and chief operating officer of the Defense Innovation Unit (DIU), said the U.S. is still building the foundation needed for large-scale drone manufacturing. 

He added that Ukraine’s battlefield requirements have pushed its industry to produce millions of small attack drones annually, while U.S. procurement programs remain at a much smaller scale.

Metz said Ukraine is expected to manufacture between 6 million and 7 million small first-person-view attack drones this year. That pace translates to about 500,000 units each month. In comparison, he stated that the U.S. government’s $1.1 billion Drone Dominance initiative will have secured fewer than 200,000 drones by February. 

New Rules Add Pressure On Suppliers

New federal requirements are making it harder for drone manufacturers by requiring them to use more U.S.-approved parts instead of foreign components. As a result, many companies are rebuilding their supply chains to keep up with the growing demand for military drones.

The Pentagon’s push to strengthen domestic manufacturing comes as Washington commits historic levels of funding toward autonomous systems, counter-drone technology and broader defense modernization efforts. Under the fiscal 2027 military budget proposal, the government is planning to spend more than $74 billion dedicated to drone and counter-drone programs. 

Initiatives such as the Golden Dome missile defense effort are expected to increase demand for advanced sensing, tracking and unmanned technologies.

Ondas develops autonomous defense technologies, including counter-drone systems, loitering munitions and secure wireless networks, through its Ondas Sentinel and Ondas Networks businesses. The company has reported more than $70 million in new defense orders across unmanned systems and border security.

Red Cat makes small drones for the military and public safety agencies. Its Black Widow drone is built for surveillance and missions in areas where GPS signals are unavailable or disrupted. The company is facing a leadership dispute after firing its chief revenue officer, prompting a lawsuit.

AeroVironment won a $117.3 million U.S. Army contract for 82 P550 eVTOL drones in July. 

So far this year, RCAT, ONDS and AVAV stocks have declined between 1% and 36%, while UMAC has gained 61% . 

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