Software Over Steel

“defense budgets are quietly turning into software and drone budgets”

defensedronesmilitary aisoftwareby theory · 17 days ago

Defense budgets are shifting away from big metal platforms toward autonomous drones and battlefield software that update faster than any tank contract cycle. This basket leans into companies building the actual drones, the AI targeting and command software, and the sensor networks that make modern warfare a data problem instead of a shipyard problem. A legacy prime is included as a small hedge since appropriations still flow through them even as the dollars get reallocated internally. The bet is that the fastest growing line items in future budgets are software licenses and drone units, not new destroyers.

Holdings: 8
Largest: 20%
Pillars: 3
Revisions: 1

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How it breaks down

Drone and Autonomous Systems

51%

Direct exposure to the unit economics of drones and autonomous platforms replacing traditional manned hardware.

Defense Software and AI

42%

Companies capturing the part of the budget moving into recurring software, targeting AI, and networked sensor systems.

Legacy Prime Hedge

A small position in a traditional prime contractor to capture budget dollars that still flow through legacy channels.

Holdings

Every position, why it is here, and its token on chain. Weights sum to exactly 100%.

Weight	Ticker	Company	Why it is here	Token
20%	PLTR	Palantir Technologies	Its AI and data platforms are becoming the operating layer that militaries buy instead of new hardware programs.	0x894E…4F2A
18%	AVAV	AeroVironment, Inc.	Its small tactical drones are the literal product line that budgets are reallocating toward.	0xF629…76A5
15%	KTOS	Kratos Defense & Security Solutions, Inc.	Its low cost drone and target systems are built specifically for the volume, software-defined warfare budgets are funding.	0x7FD0…1313
12%	AXON	Axon Enterprise, Inc.	Its software and sensor ecosystem shows how defense and public safety budgets are converting from one time hardware to recurring software revenue.	0xC27d…2648
10%	RCAT	Red Cat Holdings, Inc.	A pure play small drone maker positioned to win the smaller, faster procurement cycles replacing legacy hardware buys.	0xFDE6…0460
10%	LHX	L3Harris Technologies, Inc.	A defense electronics prime that has been shifting its own mix toward software, networking, and sensor systems within existing budgets.	0x48d6…fe25
8%	RDW	Redwire	Space and defense infrastructure that increasingly gets funded as a software and sensor play rather than a traditional hardware contract.	0x92Ef…EfFE
7%	LMT	Lockheed Martin Corp.	A legacy prime hedge since appropriations still route through it even as internal spending tilts toward autonomous and software programs.	0x329f…043c

PLTRPalantir Technologies20%
Its AI and data platforms are becoming the operating layer that militaries buy instead of new hardware programs.
0x894E…4F2A
AVAVAeroVironment, Inc.18%
Its small tactical drones are the literal product line that budgets are reallocating toward.
0xF629…76A5
KTOSKratos Defense & Security Solutions, Inc.15%
Its low cost drone and target systems are built specifically for the volume, software-defined warfare budgets are funding.
0x7FD0…1313
AXONAxon Enterprise, Inc.12%
Its software and sensor ecosystem shows how defense and public safety budgets are converting from one time hardware to recurring software revenue.
0xC27d…2648
RCATRed Cat Holdings, Inc.10%
A pure play small drone maker positioned to win the smaller, faster procurement cycles replacing legacy hardware buys.
0xFDE6…0460
LHXL3Harris Technologies, Inc.10%
A defense electronics prime that has been shifting its own mix toward software, networking, and sensor systems within existing budgets.
0x48d6…fe25
RDWRedwire8%
Space and defense infrastructure that increasingly gets funded as a software and sensor play rather than a traditional hardware contract.
0x92Ef…EfFE
LMTLockheed Martin Corp.7%
A legacy prime hedge since appropriations still route through it even as internal spending tilts toward autonomous and software programs.
0x329f…043c

What breaks this

Written by the same model that built the basket, and not edited to sound better.

01Small cap names like KTOS, RCAT, and RDW are thinly traded and can move sharply on single contract news.
02Defense budgets can swing with political cycles, and a shift back toward traditional hardware procurement would hurt this thesis directly.
03PLTR and AXON carry high valuations that assume continued software budget growth, leaving little room for disappointment.
04Export controls or program cancellations on drone systems could stall revenue for the smaller pure play names.
05Concentration in a single macro narrative means the basket underperforms if defense spending growth simply slows across the board.

Changelog

Every revision to this basket, who made it, and when. A theory is allowed to change its mind in public.

by the modelAug 16, 2026
Basket created from the thesis. 8 holdings.

How this basket was made

Source: Generated
Model: claude-sonnet-5
Chain: Robinhood Chain · 4663
Created: Aug 16, 2026

The model was given the full list of equities tokenized on Robinhood Chain and could only pick from it. Token addresses were attached afterwards from that same list, so a ticker the model invented would have been dropped rather than shown here. This is not investment advice and it has not been backtested.