US Drone Stocks Climb as Potential DJI Ban Looms
Legislation targeting Chinese drone makers on national security grounds could carve out significant market share for domestic manufacturers like AeroVironment and Kratos.
Investors are increasingly turning their attention to U.S. drone manufacturers as Washington advances measures that could effectively ban new products from Chinese industry leader DJI, creating a potentially massive opportunity for domestic firms.
Companies like AeroVironment (NASDAQ: AVAV) and Kratos Defense & Security Solutions (NASDAQ: KTOS), both key players in the American unmanned aerial systems (UAS) sector, have seen strong market performance amid a legislative push to address national security risks associated with Chinese technology. The rally is fueled by a provision within the recently finalized FY2025 National Defense Authorization Act (NDAA) that puts DJI and other Chinese drone makers on a definitive timeline for a U.S. security review.
The legislation stems from longstanding concerns from the Department of Defense and FBI that data captured by Chinese-made drones could be accessed by Beijing. While an outright ban proposed in the 'Countering CCP Drones Act' was amended, the final NDAA directs a national security authority to determine by the end of 2025 if companies like DJI pose a threat. If they are deemed a risk—or if no decision is made—their new products will be added to the Federal Communications Commission's (FCC) Covered List, effectively blocking their sale and use in the United States.
This legislative threat to DJI's dominance has ignited investor interest in U.S. alternatives. AeroVironment, an Arlington, Virginia-based firm with a market capitalization of nearly $12 billion, is a primary provider of UAS for government and defense applications. The company has seen its stock price more than double over the past year. Similarly, Kratos Defense, a $12.3 billion contractor specializing in unmanned systems and satellite communications, has experienced a significant run-up in its shares as it positions itself to capture a larger piece of the defense technology market.
DJI currently holds a commanding share of the U.S. commercial and consumer drone market, prized for its advanced technology and competitive pricing. A ban on new models would create a substantial vacuum, particularly in enterprise sectors like agriculture, construction, and public safety, forcing a large-scale migration to U.S.-made alternatives.
"The American Security Drone Act of 2023, which is part of the prior year's NDAA, already prohibits federal agencies from using federal funds to procure Chinese-made drones," notes a report from UAV Coach. "The 2025 NDAA's provisions significantly escalate the pressure, extending the effective ban to the commercial market if the security review fails." This has commercial users preemptively seeking non-Chinese alternatives to future-proof their drone fleets.
The legislative landscape is being closely watched. The original House bill, H.R.2864, passed with strong bipartisan support before its core principles were integrated into the defense budget. The move signals a clear and sustained political will in Washington to decouple sensitive technology supply chains from China.
For U.S. manufacturers, the potential restriction on their primary global competitor represents a generational opportunity. The challenge will be scaling production to meet a surge in demand and competing on the features and price points that made DJI the market leader. However, with a protected domestic market for government and, potentially, commercial contracts on the horizon, the financial tailwinds for companies like AeroVironment and Kratos appear to be just beginning.