Key Points

• Archer began Abu Dhabi test flights this week, becoming the first eVTOL manufacturer flying in the Middle East.

• Defense partnerships with Anduril and Palantir Technologies could unlock massive value through acquisition or corporate split.

• With approximately $2 billion in liquidity following White House-backed funding, Archer has the industry's strongest balance sheet.

Wall Street sees Archer Aviation (NYSE: ACHR) as just another electric flying taxi company burning cash while chasing FAA certification. Yes, the risks are real -- certification delays, massive cash burn, fierce competition, and the challenge of scaling a new form of aviation.

But that narrow view completely misses what's really happening here: Archer is quietly building the most valuable defense aviation asset outside the traditional primes -- and a major acquisition or corporate restructuring could soon expose this hidden value. Here's a deeper look at why I think these forces are building to drive a major breakout in the stock in the not-so-distant future.

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Image source: Getty Images.

The White House just changed everything

Trading around $10 with a market cap near $5.4 billion at the time of writing (July 1, 2025), Archer has delivered impressive returns, up over 245% in the past three years. But those gains pale compared to what's coming. In June 2025, following President Trump's executive order establishing an eVTOL Integration Pilot Program, Archer raised $850 million at $10 per share, bringing its total liquidity to an industry-leading $2 billion.

This wasn't just another funding round. The White House explicitly aims to establish U.S. "dominance" in eVTOL technology through its new Integration Pilot Program. The timing is perfect -- Archer serves as the Official Air Taxi Provider for the Los Angeles 2028 Olympics, creating a high-profile deadline for commercial deployment.

CEO Adam Goldstein called the executive order a "seminal moment" -- and he's right. Unlike competitors burning through capital with single-market strategies, Archer's dual approach and $2 billion war chest provide multiple paths to profitability.

While well-funded competitors like Joby Aviation (NYSE: JOBY) pursue both civilian and military markets, Archer has assembled something unique: an exclusive defense partnership combining its hybrid-electric vertical takeoff and landing (eVTOL) technology with Anduril's autonomous systems and Palantir Technologies' (NASDAQ: PLTR) artificial intelligence (AI) infrastructure. This triumvirate represents a $100 billion-plus opportunity that doesn't require FAA certification.

The defense disruption play

Yes, both Archer and Joby have defense contracts. But Archer's approach is fundamentally different. The late-2024 Anduril partnership creates a hybrid-propulsion aircraft specifically for military use -- not adapted civilian aircraft. This matters because hybrid systems offer extended range and payload capacity that pure electric vehicles can't match right now.

More importantly, Anduril brings its Lattice AI platform, already integrated into hundreds of military systems. Combined with Palantir's March 2025 partnership for AI-powered aviation software, Archer offers the Pentagon something unprecedented: a fully integrated, AI-enabled vertical lift capability from three of defense tech's hottest companies.

The partnership targets a "program of record" -- Pentagon-speak for guaranteed multiyear funding. These contracts can reach billions annually. With defense demand "stronger than expected," according to Goldstein, the company aims to build early hybrid-propulsion defense prototypes soon, distinct from its Midnight commercially oriented aircraft.

The split scenario unlocks everything

Here's where it gets interesting. Archer could unlock massive value through a corporate split, separating its commercial and defense operations. This solves multiple problems at once: Stellantis, with its substantial stake in Archer, wants to focus on commercial air mobility -- not get entangled with defense contractors. A split allows the commercial division to pursue the $1 trillion urban air mobility market with Stellantis and United Airlines, backed by the White House pilot program.

Meanwhile, the defense division -- supercharged by Anduril and Palantir -- becomes an attractive acquisition target for Northrop Grumman (NYSE: NOC) or other defense primes. Northrop has explicitly prioritized AI, autonomous systems, and next-generation aviation. The aerospace giant's Orbital ATK acquisition ($9.2 billion total in 2018) proved its ability to integrate cutting-edge aerospace assets, expanding capabilities in solid rocket motors, missile systems, and space technologies.

Multiple paths to value

Archer isn't waiting for corporate action. The company delivers its first piloted Midnight aircraft to Abu Dhabi Aviation this summer. Manufacturing has begun at its Georgia facility, targeting two aircraft per month by year-end. The Palantir partnership adds another layer, developing AI-powered air traffic systems worth billions.

With a pro forma liquidity position of $2 billion, Archer has industry-leading financial resources to execute on both opportunities simultaneously. Wall Street still prices it primarily as a pre-revenue eVTOL company, largely ignoring its defense potential. But with Anduril recently beating Boeing for major contracts and White House backing, the market's dismissive attitude is changing.

When investors recognize Archer's transformation from flying taxi company to critical defense asset, today's $10 stock will look like the bargain of the decade. After all, defense stocks tend to sport premium valuations and stellar free cash flows.

Should you invest $1,000 in Archer Aviation right now?

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George Budwell has positions in Archer Aviation, Joby Aviation, Northrop Grumman, and Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.

Northrop Grumman (NYSE: NOC) stock is in a funk. With the company reporting earnings on Tuesday, the stock promptly tanked 12.6%. Rebounding briefly on Wednesday, Northrop then proceeded to resume sliding a day later before bouncing again on Friday.

Northrop Grumman Q1 earnings

It's not hard to guess why. Year over year, Northrop Grumman suffered a significant slide in sales as two of its business segments -- its two biggest business segments, aeronautics and space -- saw sales weaken by 8% and 18%, respectively, in the first quarter. Modest gains in the company's other two, smaller businesses of defense and mission systems weren't enough to keep sales stable.

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Total sales across the company fell 7%.

Operating profit at the defense company declined as well. Indeed, it was cut roughly in half, down 46% at $573 million for the quarter. Operating profit margins shrank 450 basis points to just 6.1%. Earnings per share tumbled 47% to just $3.32 per share, and free cash flow ran negative to the tune of $1.8 billion.

What went wrong at Northrop

So it was pretty much miserable news all around. Most pundits focused on a single aspect of the news, the 18% fall-off in sales at the company's space business. Northrop blamed the decline on the "wind-down of work on the restricted space and Next Generation Interceptor (NGI) programs, which reduced sales by $228 million, as well as decreases for Commercial Resupply Services (CRS) missions, Space Development Agency (SDA) satellite programs and other restricted space programs."

That's a pretty big list of programs responsible for the decline, though. It might have taken less time for Northrop to list space programs that were not responsible!

On the plus side, at least profit margins on the sales Northrop did make in space inched higher, rising 50 basis points to 11%. Also, it's worth pointing out that despite all its troubles, Northrop still managed to earn $283 million in operating profit from its space work. That's not as much as it earned a year ago, but it's still a decent number.

To my mind, therefore, Northrop's bigger issue in Q1 wasn't its space business at all, but rather its aeronautics division -- the business segment responsible for building Northrop Grumman's new B-21 stealth bomber.

Image source: Northrop Grumman.

B-21: No bingo, no bueno!

Northrop has been doing tremendous work on the B-21 project, which has been praised by defense market analysts and the U.S. Air Force alike for its "smooth progress" and for "coming in under budget" -- a rarity in defense contracting. Indeed, by some estimates the B-21's looking likely to cost taxpayers as much as 28% less than it was originally forecast to cost.

That's great news for taxpayers. It's unfortunately turning out to be less-great news for Northrop Grumman shareholders, however, at least in the short term. Explaining why its profits got cut roughly in half last quarter, management said, "The loss [for Northrop's aeronautics unit, not for the whole company] largely relates to higher manufacturing costs ... from a process change made by the company to enable an accelerated production ramp, as well as increases in the projected cost and quantity of general procurement materials."

In other words, parts and materials needed to build the B-21 cost more in the quarter, and Northrop didn't pass those on to the government. To the contrary, Northrop made efforts to drive costs down further, and accelerate production -- and ate those costs, too!

Is Northrop Grumman stock a buy?

So basically, Northrop Grumman took one for the team last quarter. Should its stock be punished for that? Not necessarily.

Look, I've made no secret of the fact that I'm not thrilled with the valuation on Northrop Grumman stock. Like many other defense stocks, I think Northrop stock costs too much. Although its valuation has shrunk over the course of this year's slow-burn sell-off, Northrop Grumman stock still sells for nearly 1.7 times trailing sales, more than 18 times earnings, and a staggering 37 times free cash flow, according to data from S&P Global Market Intelligence.

Northrop's also guiding for low-single-digit sales growth this year (just 2% or 3%), and for less profit than Wall Street wants to see (perhaps as little as $25 per share).

Still, Northrop's space business remains profitable. Its defense business is working hard to ramp production on the B-21, and performing in a manner that's likely to endear it to cost-cutters in the Trump administration. If there's any fairness in the world, that should translate into additional contract wins for Northrop as it proves itself to be the rare defense contractor that knows how to deliver cutting-edge products on time and on (or even under) budget.

If you liked Northrop Grumman stock before this week's sell-off, and weren't scared off by the pricey valuation then, I don't necessarily think you should sell it now that it's nearly 12% cheaper, just because it's making investments to do its job even better and more efficiently in the future.

Should you invest $1,000 in Northrop Grumman right now?

Before you buy stock in Northrop Grumman, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Northrop Grumman wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Investors have spent the past couple of years acquainting themselves with artificial intelligence (AI) and quantum computing. These emerging technologies could represent the most significant leaps forward for humankind since the internet decades ago.

Of course, such groundbreaking technologies can be lucrative investment opportunities. The Defiance Quantum ETF (NASDAQ: QTUM) could be a smart way to add exposure to artificial intelligence and quantum computing to your portfolio.

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The exchange-traded fund has plunged nearly 20% from its high amid the market's recent volatility, one of its steepest declines since it began trading in 2018.

Here are three reasons to buy this AI quantum computing stock on the dip.

1. Quantum computing and AI have significant growth potential

It's impossible to predict what AI and quantum computers could make possible over the coming decades. You might see things you only thought were possible in science fiction. Humanoid robotics is already on the way, which reminds me of a famous action movie from the 1980s featuring a particular cyborg sent from the future.

Plus, AI and quantum computing could eventually be worth trillions of dollars. Research from McKinsey estimates AI could generate $23 trillion in annual economic value by 2040. Meanwhile, quantum computing could start slowly. Technology experts have speculated that practical quantum computers could still be several years away.

However, they could be a game changer once they get here. Boston Consulting Group's report on quantum computing forecasts that quantum computers will create $5 billion to $10 billion in annual economic value by 2030, but projects this to increase to $450 billion to $850 billion by 2040. Time will tell how accurate such estimates and timelines are, but the financial and real-world potential is exciting, to put it mildly.

2. An ETF means you don't have to pick winners

AI and quantum computing present quite a challenge for investors. Most individuals, let alone professional investors, aren't experts in these complex fields.

Therefore, picking individual winners could prove extremely challenging. That's a great reason to invest in a diversified instrument such as the Defiance Quantum ETF. It represents a global basket of 70 companies involved with AI and quantum computing -- someone else did the hard work of picking high-quality stocks in these advanced technology industries.

The fund's top holdings include:

Data source: Defiance ETFs.

Since AI and quantum computing have immense potential but are still so unpredictable, casting a wide net is a wise strategy. It could be a case of the 80-20 rule, where a select few companies produce a majority of the value in AI and quantum computing.

The ETF's construction spans various companies, industries, and countries, reducing risk by limiting the top holding to just 3.31% of the fund's total assets. Additionally, the expense ratio (0.4%) appears reasonable, considering the simplicity and diversification you gain in return.

3. The Defiance Quantum ETF has outperformed the market

Many quantum computing stocks have been highly volatile, and investors who bought at the wrong time have endured steep losses.

The Defiance Quantum ETF has been around since 2018, and has outperformed the Nasdaq Composite, a prominent technology-leaning U.S. stock market index, since about 2021:

QTUM Total Return Level data by YCharts

Past performance does not guarantee future results, but it demonstrates the effectiveness of a diverse approach to speculative industries like AI and quantum computing. I don't see why the Defiance Quantum ETF can't continue to perform well as these technologies mature.

Should you invest $1,000 in ETF Series Solutions - Defiance Quantum ETF right now?

Before you buy stock in ETF Series Solutions - Defiance Quantum ETF, consider this:

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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends Alibaba Group and RTX. The Motley Fool has a disclosure policy.