Pentagon in talks to take equity stakes in U.S. drone companies

Structuring options under discussion include debt and equity arrangements that would result in direct U.S. government ownership in participating companies. Among the government bodies involved is the Office of Strategic Capital, an office established under the Biden administration whose mandate covers financing for companies tied to national security supply chains.

The three companies named in the talks are Unusual Machines, Performance Drone Works, and Neros Technologies. Unusual Machines is a drone components provider. Performance Drone Works has previously secured U.S. Army contracts for reconnaissance drone supply. Neros, which counts Sequoia Capital among its backers, builds first-person-view drone systems.

At Unusual Machines, Donald Trump Jr. holds shares and sits on the advisory board, a dual role that observers say would make any Pentagon funding agreement a magnet for conflict-of-interest questions and oversight from Congress, according to CNBC.

Rather than acquiring drone hardware outright, the funding is intended to grow manufacturing capacity and drive down prices among chosen producers, The Wall Street Journal reported. No agreements have been signed, and the Defense Department is still conducting due diligence on prospective partners.

Unusual Machines stock surged more than 65% on Thursday following the report. Shares of AeroVironment and Kratos Defense & Security also climbed, while the Drone & Modern Warfare ETF gained 12%.

The Trump administration has moved to expand its ties to the domestic drone industry through a combination of executive action, procurement programs, and direct investment. President Donald Trump signed an executive order calling for scaled-up domestic drone production, and the administration has barred imports of new foreign drone models and critical components, with some exemptions running through the end of 2026. A separate Pentagon program, carrying a $1.1 billion price tag, is targeting a stockpile of around 300,000 low-cost attack drones to be delivered before the close of next year, according to Investor's Business Daily.

Donald Trump Jr. has deepened his own presence in the sector alongside those policy moves. Beyond his role at Unusual Machines, his firm 1789 Capital has taken a stake in Anduril, a defense-technology company focused on autonomous and unmanned systems, and he is an investor in Powerus, a heavy-lift drone maker that already counts the Defense Department as a client.