The FCC’s ban on foreign-made drones sent shares of American drone companies soaring. For example, Unusual Machines, a Florida-based drone component manufacturer, saw its stock jump on the news. Shares rose about 24% between Friday, Dec. 19 (before the Monday, Dec. 22 announcement) and the close of trading on Friday, Dec. 26. Other American drone stocks rose, too.
So should you jump on the train of investing in American drone companies? Beyond Unusual Machines, companies like Doodle Labs make communication systems, FLIR (now part of Teledyne) produces thermal imaging sensors, ARK Electronics manufactures flight controllers, CubePilot builds autopilot systems, Modal AI develops AI-powered flight controllers, and Mobilicon makes various drone components. These are American companies making real products that go into real drones.
This is not intended to be investment advice, but — after more than a decade of watching the drone industry — here’s my take in the case for and against buying American drone stocks right now.
The bull case for investing in American drone companies
Let’s start with the optimistic scenario, because it’s what every drone stock promoter will be pitching you.
The market opportunity is massive. DJI controls an estimated 90% of the global drone market. In the U.S. alone, there are nearly half a million registered drone pilots, plus thousands of commercial operations across construction, agriculture, energy, mining and public safety. All of that demand now has nowhere to go except American manufacturers.
The competition just got eliminated. American drone companies now have a regulatory moat that would make a medieval castle jealous. Want to buy a new drone in the U.S.? Your options are now severely limited to domestic manufacturers.
Political tailwinds are strong. This is part of a broader “America First” industrial policy. The Trump administration has issued executive orders on “Restoring American Airspace Sovereignty” and “Unleashing American Drone Dominance.” There’s money flowing into counter-drone technology for the 2026 World Cup and 2028 Olympics. The government is creating demand while eliminating foreign supply.
Defense contracts are lucrative. Most of the American drone (or component) companies named above currently serve enterprise and military markets. Companies like Skydio pivoted from consumer drones to military and government contracts for good reason: the margins are better and the customers are less price-sensitive. With heightened security concerns, there’s likely to be significant government spending on domestic drone technology.
There is a path where American manufacturers scale up production, costs come down and a genuine domestic drone industry emerges. Some investors in American drone stocks are making that bet.
The bear case
Now let’s talk about why that bull case may require an extraordinary amount of squinting. Namely? There’s no track record of success. American consumer drone companies have an unbroken history of failure. Here are just a few examples of consumer drone companies that have failed.
- 3D Robotics: Burned through nearly $100 million before pivoting away from hardware
- GoPro: Drone division was such a disaster they recalled the entire product line
- Skydio: Shut down consumer operations to focus on enterprise and government contracts (though I wouldn’t say the company itself as failed — just its consumer arm)
- Lily Robotics: $34 million raised, never shipped a product, founders charged with fraud
While some might think these were failures because of unfair Chinese competition, don’t ignore that these were also failures of execution, manufacturing capability and fundamental business economics.
The supply chain exists but can’t scale to consumer markets or small business budgets. Yes, Doodle Labs makes excellent communication systems and FLIR makes top-tier thermal cameras. But their products are designed for military and enterprise customers who’ll pay $500 for a radio module or $5,000 for a thermal sensor.
And even “American-made” drones rely heavily on foreign components. Motors, batteries, cameras, flight controllers, sensors and other critical components are overwhelmingly manufactured in Asia.
Building domestic supply chains for these parts isn’t a matter of flipping a switch. It requires:
- Massive capital investment in manufacturing facilities
- Years of R&D to match existing technology
- Supply chain partnerships that don’t currently exist
- Skilled labor forces that need to be trained
- Economies of scale that won’t exist until production ramps up significantly
Unless companies lobby for exceptions (which will likely need to happen), investing in most American drone companies means investing in building an entire industrial base from scratch.
CubePilot, ARK Electronics, and Modal AI make sophisticated flight controllers, but they’re selling to people building custom enterprise drones, not teenagers buying their first quadcopter. The economics are completely different.
Less competition generally means inferior quality. When your competitive advantage is “the government banned everyone else,” you don’t have to innovate on price or features. You just have to exist. That’s not a recipe for companies that will generate strong returns for shareholders — it’s a recipe for rent-seeking behavior and stagnation.
The market might not accept the prices. Right now, you can buy a DJI Mini 4K for around $300. What happens when the cheapest American alternative costs $1,200 and doesn’t perform as well? Some commercial operators will pay it because they have no choice.
But the consumer market? The hobbyist market? The small business owner who was thinking about adding drone services? At four times the price, you’re likely not shifting demand to American suppliers — you’re destroying a significant portion of the demand altogether.
Component makers: the opportunity and risk
American drone component manufacturers, might be the more interesting investment play than complete drone systems.
Companies like Doodle Labs, ARK Electronics, CubePilot, Modal AI, FLIR/Teledyne, and Mobilicon are positioned to benefit from this ban in theory. If American drone manufacturers are going to scale up, they’ll need American-made components. These companies have proven technology and established reputations in the enterprise space.
The risk? Most of these companies have optimized for low-volume, high-margin sales to government and enterprise customers. Their business models aren’t built around selling millions of units at consumer prices.
Can Doodle Labs really redesign their communication systems (made for military applicants) for use in a $300 consumer drone? And if so, can they scale production to support hundreds of thousands of units annually?
And FLIR makes the best thermal cameras in the business (arguably across any country in the world), but again, it makes a $10,000 drone focused on public safety agencies with tech that’s overkill for many users who currently buy DJI.
Look to Unusual Machines as an example
Let’s look at Unusual Machines specifically, since it’s one of the few publicly traded pure plays on this theme. The company manufactures drone components and has Donald Trump Jr. on its advisory board — which should tell you something about how this company plans to compete (hint: it’s not primarily through superior technology).
Unusual Machines makes drone frames, propellers, motors, and other components. It also acquired Rotor Riot and Fatshark, two popular names in the FPV space. These days, the company has primarily been positioning itself as an all-American alternative to Chinese supply chains.
With foreign components now banned, Unusual Machines could theoretically capture significant market share in the component space. They’ve been building out manufacturing capacity and emphasizing their “Made in USA” credentials.
Unusual Machines did see its stock price increase, and it may continue to see temporary bumps as more investors look to ride a potential increasing wave. However, for now, there are a few reasons to be skeptical about the company’s financials.
- They’re not profitable. Though it achieved profitability in Q3 driven by unrealized investment gains; core operations remain unprofitable.
- They still rely on some foreign sourcing. Even with the “Made in USA” marketing, it’s nearly impossible to build drones with zero foreign components. Motors, batteries, and electronic components are particularly difficult to source domestically. For example, its own Rotor Labs Motors are made in Australia. The more the government cracks down on foreign parts, the harder it becomes for “American” manufacturers to actually deliver products. (Though again, Donald Trump Jr. on the advisory board will likely help this company).
- The advisory board tells you everything. Speaking of — when your competitive advantage is having the president’s son on your advisory board — you’re not competing on innovation. You’re competing on connections. That might work great for winning government contracts in the short term, but it could ultimately prove a terrible foundation for long-term shareholder value.
The China retaliation risk
Here’s one more risk that most bull cases ignore entirely: China isn’t going to sit quietly while the U.S. bans its drone manufacturers.
Liu Pengyu, spokesperson for the Chinese Embassy, has already warned that China will take “necessary measures to firmly safeguard the legitimate rights and interests of Chinese enterprises.” That’s diplomat-speak for “we’re going to retaliate.”
What could that look like?
- Export controls on critical components that American manufacturers still need
- Rare earth material restrictions that would devastate electronics manufacturing
- Tariffs or bans on American drones in Chinese and allied markets
- IP theft acceleration as Chinese companies decide fair play is off the table
- Subsidies to undercut American manufacturers in third-country markets
If China decides to play hardball, the American drone manufacturers you’re investing in could find themselves unable to source critical components at any price. Even companies like Doodle Labs and ARK Electronics likely depend on some Asian-sourced electronic components for their products. That regulatory moat starts looking a lot less valuable when you can’t actually manufacture the product.
Investments to consider
Again, this is not investment advice, but here are some ways that you might play this safe — and that’s by investing in the following types of companies:
Drone detection and counter-drone technology: The government is spending heavily on systems to detect and neutralize unauthorized drones around critical infrastructure and major events. Companies in this space benefit from drone proliferation regardless of who manufactures them.
Drone software and services: The airspace management, data processing and analytics layer is less dependent on hardware manufacturing capability. Companies providing drone-as-a-service or drone fleet management might be better positioned to capture value.
Established component suppliers with track records: Companies like Teledyne (which owns FLIR) are publicly traded and have proven they can deliver quality products. They’re more expensive and less leveraged to this specific news, but they’re also far less likely to implode if the market doesn’t develop as expected.
Defense contractors with drone divisions: Large defense contractors like Northrop Grumman, Lockheed Martin, and RTX have existing drone programs, manufacturing capability, and government relationships. They’re more expensive and less leveraged to this specific news, but they’re also far less likely to go to zero.
The bottom line
The bull case for American drone stocks requires you to believe that companies which couldn’t compete on a level playing field will suddenly flourish when handed a captive market.
It’s entirely possible that happens (and for the sake of us, I hope it does!). Alas, history suggests otherwise. When companies don’t have to compete on price and quality, they often get lazy. When their primary competitive advantage is regulatory protection rather than innovation, they optimize for lobbying rather than R&D.
The component makers, like Doodle Labs, ARK Electronics, CubePilot, Modal AI, FLIR/Teledyne, and Mobilicon have better fundamentals than startups trying to build complete systems. They make real products that work. Keep in mind, though that they’ve never had to operate at consumer scale or at consumer prices.
A long-term investment in American drone stocks right now isn’t a bet on superior technology or business execution. It’s a bet that:
- Component makers can successfully transition from enterprise to consumer economics
- The ban will survive legal challenges
- China won’t retaliate in ways that cripple American manufacturers
- Companies can build supply chains and scale production faster than the market expects
- Customers will accept much higher prices rather than simply buying less
- A future administration won’t reverse course on this policy
- The companies won’t squander their regulatory advantage through poor execution
If you’re going to invest in American drone manufacturers, just realize that you’re likely not backing the next Apple. You’re backing companies that just got handed a government-mandated monopoly and hoping they don’t screw it up.
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