Swarmer takes off

Despite the ongoing war in Iran, defense stocks have largely stalled, with much of the expected upside priced in long ago—with President Trump’s election victory.

But one stock is rewriting that narrative: Yesterday, Swarmer soared 520% on its Nasdaq debut, and added another 77.42% today.

As the name suggests, the company specializes in coordinating drone swarms—creating networks of autonomous drones that communicate with each other in real time, share data, and make decentralized decisions. Swarmer doesn’t actually manufacture the drones, but instead builds the AI software that powers them.

For a stock flying this high, you’d expect strong fundamentals. But the company generated just $309,920 in revenue last year, down 6% year over year, and posted an $8.5 million loss, more than four times the prior year’s deficit.

So why is the stock rising?

1. Low revenue = high leverage: Founded in 2023 and valued at $380 million, Swarmer’s small revenue base means even a single contract win could materially move the stock, and that’s exactly what investors are betting on.
2. The business itself: Swarmer’s drones are cheap but effective. One pilot can control up to 690 drones at once, and, compared to missiles that can cost $4 million each, drones can be deployed for closer to $40,000 a pop. And it’s not just theoretical: Swarmer’s drone swarms have already been deployed in Ukraine, and in 100,000 real-world combat missions since April 2024.
3. Timing: A US ban on Chinese drone manufacturer DJI late last year opened the door for domestic players, and the ongoing Iran conflict is accelerating demand—putting Swarmer at the intersection of AI and defense; two of the market’s hottest themes.

How to play it

While Swarmer has been gaining altitude, it’s not the only name in the game: Karman, a drone manufacturer, has also been making headlines. But after surging 180% over the past year and trading at 150x forward earnings (up from 90x a year ago), much of its upside may already be priced in. Meanwhile, AeroVironment has faced similar skepticism, with a recent earnings miss sending the stock down 18.69% over the past month.

Going forward, investors should watch whether Swarmer stabilizes, which could signal real demand versus speculation. At the same time, policy tailwinds will be key: the White House is expected to request $50 billion in additional war funding soon, which, if granted, could further boost the drone sector.—SY