Steve Eisman said on a recent podcast: “I’m sort of bewildered, given that there’s a war going on, why people would be selling defense stocks.” The reason that bewilderment matters to your portfolio is sitting on top of a wall of capital nobody is talking about.
Peter Arment, on the same segment, laid out the number: “$66 billion between 2020 and 2024 has come into the defense industry through venture capital and private equity.” Silicon Valley is rebuilding the Pentagon’s supply chain in real time, and the recent correction handed retail a window that doesn’t typically open twice. 1
Red Cat Holdings (RCAT): The Small-Cap Drone Pure-Play Start with the name nobody on CNBC is leading with. Red Cat Holdings (NASDAQ:RCAT) is the textbook “purpose-built, lower-cost” archetype Arment described. Its Black Widow ISR drone is the Army’s Short Range Reconnaissance winner, the Blue Ops unit is pushing into unmanned surface vessels, and CEO Jeff Thompson is openly chasing the Pentagon’s drone budget line.
Thompson said: “Secretary of War Hegseth has signaled budget allocations of up to $74 billion for UAV and USV procurement… in this arena, the Factory is the Weapon.” Q1 FY26 told you the volume curve is bending: revenue hit $15.47 million, up 849.3% year over year, gross margin flipped to 12.7% from negative 52.1%, and management is guiding to a $150 million to $180 million annual revenue target. The stock is already responding, up 78% year to date and 56% in the past week alone. The catch is that RCAT is one product line.