In the United States, defense spending could also see a significant increase. President Donald Trump recently proposed a massive $1.5 trillion defense budget for fiscal year 2027. If approved, the proposal would represent a substantial jump from the roughly $900 billion defense budget authorized for 2026. Other countries are also boosting military investments. Canada, for example, has committed approximately $81.8 billion over the next five years to strengthen the capabilities of the Canadian Armed Forces. 

From here, global defense spending could rise further, given intensifying conflicts in Russia and Ukraine, as well as increased security issues across Asia and parts of Africa.  In addition, NATO allies committed to investing 5% of Gross Domestic Product (GDP) annually in core defense requirements and defense- and security-related spending by 2035. They will allocate at least 3.5% of GDP annually based on the agreed definition of NATO defense expenditure by 2035 to resource core defense requirements and to meet the NATO Capability Targets,” as noted by NATO.

So, what’s the best way to trade it?

One way is to invest in this surge in defense spending is through defense stocks, such as Palantir Technologies (NASDAQ: PLTR), Lockheed Martin (NYSE: LMT), C3.ai (NYSE: AI), BigBear.ai (NASDAQ: BBAI), AeroVironment (NASDAQ: AVAV), and Kratos Defense & Security (NASDAQ: KTOS), to name a few.

Or, you can diversify with exchange-traded funds (ETFs), such as:

Global X Defense Tech ETF (SHLD): A Bet on AI and Defense Technology

With an expense ratio of 0.5%, the Global X Defense Tech ETF (NYSEARCA: SHLD) invests in companies positioned to benefit from the increased adoption and utilization of defense technology. This includes companies that build and manage cybersecurity systems, utilize artificial intelligence and big data, and build advanced military systems and hardware, such as robotics, fuel systems, and aircraft for defense applications. Some of its 49 holdings include Lockheed Martin, RTX Corp., General Dynamics, Palantir Technologies, Northrop Grumman, and L3Harris.

U.S. Aerospace & Defense ETF (ITA): Exposure to Aerospace and Military Leaders

With an expense ratio of 0.38%, the U.S. Aerospace & Defense ETF (BATS: ITA) offers exposure to companies that manufacture commercial and military aircraft and other defense equipment. Some of its 41 holdings include GE Aerospace, RTX Corp., Boeing, Lockheed Martin, Northrop Grumman, L3Harris Technologies, General Dynamics, and Axon Enterprise.

SPDR S&P Aerospace & Defense ETF (XAR): Diversified Access to Defense Manufacturers

The SPDR S&P Aerospace & Defense ETF (NYSEARCA: XAR) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P Aerospace & Defense Select Industry Index. The XAR ETF has an expense ratio of 0.35%. Some of its top holdings include Lockheed Martin, Northrop Grumman, Howmet Aerospace, L3Harris Technologies, Carpenter Technology, and Curtis-Wright Corp.

Invesco Aerospace & Defense ETF (PPA): Broad Exposure to Defense and Space Innovation

The Invesco Aerospace & Defense ETF (NYSEARCA: PPA) tracks a market-cap-weighted index of US-listed stocks involved in the defense, military, homeland security and space industries. The PPA ETF has an expense ratio of 0.57%. Some of its top holdings include Lockheed Martin, RTX Corp., General Electric, Boeing, Northrop Grumman, and General Dynamics.

Why Defense Spending Could Become a Decade-Long Megatrend

Defense spending is one of the most powerful long-term investment themes in the market. From advanced AI-driven warfare systems to aerospace innovation and cybersecurity infrastructure, governments around the world are preparing for a new era of military modernization—and investors are paying close attention.

Whether through individual defense stocks or diversified ETFs, the sector offers multiple ways to gain exposure to what could become a multi-trillion-dollar growth opportunity over the next decade. While no investment is without risk, the sustained rise in global defense budgets, combined with increasing geopolitical uncertainty, could provide strong tailwinds for aerospace and defense companies well into the future. For traders and long-term investors alike, this may be one megatrend worth watching closely.

That’s because the numbers tell a very different story. The global drone market is projected to surge from about $8.8 billion today to more than $82.5 billion by 2032. That kind of expansion is already lifting drone stocks and ETFs tied to aerospace, defense, and autonomous technology.

And the real story may just be getting started.

One of the biggest catalysts is the push to move away from Chinese-made drones.

For years, Chinese manufacturers have dominated the global drone market, with estimates putting their market share somewhere between 70% and 90%. But that dominance is now being challenged.

The U.S. defense industry, state and local law enforcement agencies, and even commercial businesses are increasingly moving to ban Chinese-made drones and drone components because of national security concerns.

That shift could create a massive opportunity for U.S.-based drone and defense companies. That’s because demand for drones is exploding across multiple industries.

The U.S. military is using drones for surveillance, reconnaissance, and battlefield support. Farmers are using them for crop monitoring and spraying. Logistics companies are testing drones for delivery and warehousing. Oil and gas companies are using them for inspection.

Mining, construction, emergency management, and renewable energy companies are also finding new use cases. In other words, drones are no longer just a niche technology.

They are quickly becoming essential tools across some of the world’s biggest industries.

This powerful combination of geopolitical shifts, rising defense budgets, and expanding commercial use cases is accelerating demand. As restrictions on Chinese-made drones increase and industries across the economy adopt drone technology, investors may be looking at drone stocks and ETFs that could deliver outsized returns over time.

Top Drone Stocks to Watch Right Now

For investors who prefer individual names, several drone-focused companies are worth watching.

• AeroVironment (NASDAQ: AVAV) remains a leader in military drone systems.
• Draganfly (NASDAQ: DPRO) offers exposure to commercial and public safety drone solutions.
• L3Harris Technologies (NYSE: LHX) provides broader defense exposure with meaningful drone integration.

These companies are directly tied to the growth of drone technology and could benefit as adoption accelerates.

While investors can always look at individual drone stocks, there are also exchange-traded funds that offer exposure to the broader theme.

iShares U.S. Aerospace & Defense ETF (ITA)

One way to play the drone boom is through the iShares U.S. Aerospace & Defense ETF (BATS: ITA). The ETF invests in U.S. aerospace and defense companies, including businesses that manufacture commercial aircraft, military aircraft, and defense-related equipment.

Some of its top holdings also have exposure to drone and defense technology.

For example, GE Aerospace (NYSE: GE) is currently the fund’s largest holding, with a weighting of about 21.04%. RTX Corp. (NYSE: RTX) is another major holding, with a weighting of about 14.42%.

As defense spending remains elevated and drone demand continues to grow, ITA could benefit from broader strength in the aerospace and defense sector.

ARK Autonomous Technology & Robotics ETF (ARKQ)

Another ETF to watch is the ARK Autonomous Technology & Robotics ETF (BATS: ARKQ).

This Cathie Wood-managed ETF focuses on companies involved in autonomous technology, robotics, artificial intelligence, energy storage, and next-generation transportation.

The fund has an expense ratio of 0.75% and invests at least 80% of its assets in companies tied to autonomous technology and robotics.

Drone Stocks and ETFs Could Quietly Deliver Big Gains

Drones may not sound like the most exciting investment theme.

But sometimes the most “boring” ideas are the ones that quietly produce the biggest gains.

With the global drone market expected to grow significantly, Chinese-made drones facing restrictions, and demand rising across defense and commercial industries, drone-related stocks and ETFs could see strong upside in the years ahead.

For investors looking for exposure, names like AVAV, DPRO, and LHX are worth watching.

And for those who prefer a basket approach, ETFs like ITA and ARKQ may be two of the easiest ways to play the drone boom.