Drone Tech Maker’s 1,000% Surge Shows Latest Wall Street Fad

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(Bloomberg) — The eye-popping market debut of a tiny drone software company this week reveals a newfound investor appetite for stocks that fall at the intersection of geopolitics, rising spending on defense technology and artificial intelligence. 

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Shares of Austin, Texas-based Swarmer Inc., whose AI platform is used to deploy and coordinate drone swarms, soared nearly 1,000% in the first three trading sessions after its initial public offering. Market watchers said the rally reflects how the war in Iran has swiftly reshaped the outlook for the defense industry as governments around the world rush to retool their militaries to combat a new generation of threats.

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“Whether the geopolitical tensions remain extremely high or not, military spending is going to increase around the globe,” said Matt Maley, chief market strategist at Miller Tabak + Co. “The defense sector is attracting a lot of money in general, but the stocks that are associated the most with AI technology are gaining meme-like attention.”

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Swarmer’s rally indeed has echoes of the violent swings associated with so-called meme stocks, where a combination of a relatively small number of tradeable shares, the company’s ability to capture the interest of retail investors with popular themes and strong social-media momentum can lead to massive spikes and subsequent crashes.     

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The company generated just $309,920 in revenue for the year ended December 31, 2025, a roughly 6% decline from the same period a year earlier. Its profitability also worsened over that stretch, with the company reporting a loss of about $8.5 million, more than four times larger than its net loss in 2024. 

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Drones have drawn particular attention because they are being used heavily by Iran, Israel and the US in the current war, echoing the pattern seen since Russia’s 2022 invasion of Ukraine. That has highlighted a shift in warfare toward lower-cost, often autonomous and unmanned systems that rely heavily on software. Even though US military spending significantly dwarfs that of any other country, Iran has still been able to inflict damage in the current war by using drones to hit several Gulf nations, spiking global energy prices and sending regional countries scrambling for more air defense.

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“Military experts are drawing the conclusion that small drones are likely the best defense against drone attacks,” said Michael O’Rourke, chief market strategist at JonesTrading.

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This week, the Pentagon said it is planning to mass produce one-way attack drones created by reverse-engineering Iran’s cheap and deadly Shahed system. The news sent shares of drone makers AeroVironment Inc., Unusual Machines Inc. and Duke Robotics Corp. jumping on Tuesday. 

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A Bloomberg global defense index is up 16% in 2026, compared with a 3.5% decline for the S&P 500. US military spending in the first six days of hostilities in the Middle East totaled $11.3 billion, according to the Pentagon, which has asked Congress for an additional $200 billion to pay for the war against Iran.

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“I think it’s fair to say that everybody around the world now understands that warfare is now about the economics of warfare,” said Benjamin Wolff, chief executive officer of Palladyne AI Corp. “A lot of low cost weapons can overpower exquisite, expensive low volume weapons, and we’re seeing that in spades obviously for several years in Ukraine. And we’re seeing it now in a little different context in Iran.”