Episode summary
The Pentagon's New DAWG Command and the 24,000% Budget Jump
Summary
Dylan Grice argues that the defense sector’s recent sell-off has created an attractive setup for the next year, even as much of the market chases AI. He says the U.S. military is still the strongest in the world, but much of it was built for 20th-century warfare, which has left expensive systems vulnerable to cheap drones in conflicts like Ukraine and Iran.
He traces America’s drone lag to two problems: China’s state-backed manufacturers flooding the market at a loss, and Washington’s lack of political will to make drone investment permanent. Grice says that began to change over the past six months as the Pentagon moved to block non-military China drones and folded its efforts into the Defense Autonomous Warfare Group, or DAWG, a sub-unified command for autonomous warfare.
Grice treats the new command and the proposed budget jump from $225 million in fiscal '26 to $55 billion in fiscal '27 as the key signal that autonomous warfare is becoming a lasting priority. He says that shift should benefit defense contractors and that his team will publish a report on the best opportunities tied to the new spending cycle.
Key takeaways
- Grice says the defense sector’s recent weakness has set up some of the best opportunities in the market over the next year.
- He argues cheap drones in Ukraine and Iran show that multimillion-dollar missile systems are being stressed by low-cost threats.
- Grice says China’s state-backed drone pricing helped keep U.S. firms from building scale or capability.
- He says the Pentagon’s move to a sub-unified autonomous warfare command signals permanent commitment, not a temporary pilot.
- Grice highlights a projected budget jump from $225 million in fiscal '26 to $55 billion in fiscal '27 as a major catalyst.
- He expects defense contractors tied to autonomous warfare to be the next area of opportunity.
Notable quotes
“This butt kicking has really set the table for some of the best opportunities in this market over the next year”
“we have the strongest military in the world, no doubt about it. That's true, but a lot of that military is built for fighting the last war”
“cheap 10, 15,000 dollar drones that are causing massive problems for our multi-million dollar missiles”
“The Defense Autonomous Warfare Group. Dog, dog for short, which I kind of like. Dog, the DAWG”
“It's 24,000%. It's almost ridiculous”
How the episode opens
Good morning. This is Dylan Jovaneau with Behind the Markets. Happy Tuesday.
Today's Tuesday, June 30th. Last day of the month. Yesterday I talked about the problems we've had in the defense sector in the past, you know, eight months really it's sold off heavily and how we've gotten our butts kicked in some stocks.
I mean, we still have big profits in them cuz we've held on to them for years, but how we've had our butts kicked as a sector has rotated away as money's come out of it. Today I'd like to talk about really kind of the table set. This butt kicking has really set the table for some of the best opportunities in this market over the next year.
Truly. And I think you're going to hear what I'm saying, you know. Yesterday I had to take my medicine.
Today I get to talk about what why I'm really excited, actually, in a little bit more detail. So, you know, look, we have the strongest military in the world, no doubt about it. That's true, but a lot of that military is built for fighting the last war, specifically 20th century war.
And you could see this play out in Ukraine and in Iran where we have these cheap 10, 15,000 dollar drones that are causing massive problems for our multi-million dollar missiles. It takes a lot of money to knock out a stupid cheap drone or a stupid cheap drone can really cause a big expensive missile system or weapons platform a whole lot of problems. Now, this is not surprising to us.
Members of Behind the Markets, you knew this in 2020. You knew it again in 2021. I remember the biggest marketing campaign we had in 2022 was Wargames where we talked about this very, very thing.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- pentagon autonomous warfare
- china drone ban
- defense sector selloff
- autonomous warfare budget surge
- drones vs missile systems
Companies and tickers mentioned
- DJI
Watch the episode
Watch “The Pentagon's New DAWG Command and the 24,000% Budget Jump” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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