Attack of the Drones (In a Good Way)

Hey Superheroes,

Gold is close to breaking past US$3,900/oz this week, setting a new all-time high as investors piled into safe havens amid fresh economic and political uncertainty.

But the big global headline? The U.S. government has officially shut down, marking the first federal funding lapse in nearly seven years. Around 750,000 federal workers have been placed on unpaid leave, national parks are closing and key services like passport processing and medical research are being disrupted.

The political standoff between Republicans and Democrats centres on healthcare funding and tax credits. Meanwhile, President Trump’s administration has hinted the shutdown could be used to permanently downsize the public sector.

Despite that both the ASX and Wall Street look set to end the week in green. Gold stocks outperformed locally, helping the index avoid deeper losses.

Let’s dive into the week’s biggest stories.

DroneShield Soars on Defence Demand

DroneShield has become the ASX’s small-cap star, with shares more than doubling since August and gaining another 14% this week alone.

The surge comes as global defence spending ramps up and investors bet on new contract wins amid rising geopolitical tensions.

🧱 EU defence push fuels investor optimism

Momentum kicked off after reports that the European Union is weighing a “drone wall” across its eastern border to counter growing airspace threats.

The proposal, praised by NATO, is one of several under discussion by EU leaders, alongside new missile and space defence programs. While no contracts have been awarded, investors see DroneShield as a likely beneficiary given its existing footprint across Europe.

📦 Orders rolling in

DroneShield also recently crossed 4,000 systems sold with A$7.9 million in new orders flowing through from various defence clients. Key wins include a record A$61.6 million European deal plus additional supply to Ukraine and the Australian Defence Force.

Its RFPatrol system – a compact, body-worn drone detector – has been one of its most in-demand products, especially for frontline military use.

🤖 Software’s growing role

While hardware remains core, DroneShield is leaning into software for long-term growth.

Its RFAI-32 detection model – trained on drone signal data – boosts accuracy in hostile environments. The company’s SaaS platform, which powers updates across over 1,600 AI-enabled devices, generated A$3 million in revenue last half and is expected to scale as adoption grows.

DroneShield remains debt-free with A$200 million in cash, giving it flexibility to fund further expansion.

🛡️ Another soaring drone-defense company

Another ASX-listed defence name, Electro Optic Systems (ASX:EOS), hit a record high this week after upgrading revenue forecasts and flagging new deals.

EOS expects A$115–125 million in revenue this financial year, supported by a A$299 million contract backlog. It’s also chasing major opportunities, including a A$100 million Land 400-3 program, a A$50 million counter-drone deal in North America and A$20 million in European RWS sales.

While timing remains uncertain, EOS joins DroneShield as a top-traded name on Superhero as investors seek exposure to the defence boom.

Two Aussie Media Firms Shake Hands

Closer to home, Australia’s media landscape is in for a shakeup with Seven West Media (ASX: SWM) and Southern Cross Austereo (ASX: SXL) announcing a merger to create a $420 million cross-platform media company.

The deal will combine Network Seven, The West Australian newspaper, the Triple M and Hit radio networks and Southern Cross’ Listnr app – bringing TV, print and radio under one roof.

🔄 The structure

Southern Cross will issue new shares to acquire Seven West under a scheme of arrangement. Seven shareholders will need to vote but Southern Cross shareholders won’t, thanks to a structure that’s raised eyebrows across the market.

The deal values Seven at just 13¢ per share, below its previous closing price, and has drawn criticism from major investors and proxy groups. Some say it exposes a loophole in ASX takeover rules, with regulators now reviewing the process.

🧾 Stokes cashes out (and writes off)

Behind the scenes, the deal also gives billionaire media mogul Kerry Stokes a handy tax break. His Seven Group Holdings stake in Seven West was once worth A$730 million but had dropped to A$89.7 million before the merger.

With the sale, SGH is expected to book a $600 million accounting loss, which could reduce its tax bill by around A$180 million based on the 30% corporate tax rate.

It’s a strategic exit: Seven is a small part of SGH, which is now a A$20 billion industrials powerhouse with interests in WesTrac, Coates and Boral.

🔦  Some other things we’re shining the Spotlight on:

META’S CLOUD CRUSH: CoreWeave shares jumped 10% after securing a US$14.2 billion deal to supply AI infrastructure to Meta. It’s the latest in a string of mega-contracts following a US$6.5 billion expansion with OpenAI. The deal reduces CoreWeave’s reliance on Microsoft, its largest customer last year.

EA LEVELS UP (PRIVATELY): Electronic Arts is going private in a US$55 billion all-cash deal, the largest of its kind. The buyers? A powerful trio of Silver Lake, Saudi Arabia’s PIF and Jared Kushner’s Affinity Partners. EA shareholders will receive US$210 per share, a 25% premium to pre-deal prices.

ALIBABA’S AI GLOW UP: Alibaba’s shares have doubled year-to-date driven by its US$52 billion AI investment plan, a new large language model and the return of Jack Ma. Its AI segment posted triple-digit growth for the eighth straight quarter and investor optimism is high as regulatory risks ease.

Keep up to date on the markets by following us on Instagram @superheroau.