You Can Do Better Than Rocket Labs With This 1 ETF

One of the top-performing names in the stock market in the last two years has been Rocket Lab (NASDAQ: RKLB). The company, which provides launch services, rockets, space vehicles, and satellite equipment, is an emerging force in U.S. and international space programs. Rocket Lab stock jumped 360% in 2024 and 174% in 2025. A $10,000 investment three short years ago would have turned into $186,880 today -- that's life-changing money for many people.

Rocket Lab is a great name for anyone who is looking to invest in a space stock. But as much as I like Rocket Lab stock, I think a better buy today is the Defiance Drone and Modern Warfare ETF (NYSEMKT: JEDI). This fund has Rocket Lab as a top holding, and it also provides exposure to several other interesting companies in related industries.

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What is the JEDI ETF?

The Defiance Drone and Modern Warfare ETF, is operated by Defiance ETFs, which focuses on thematic exchange-traded funds. ETFs come in all sorts of flavors and colors -- some are index funds that track the S&P 500 or one of its sectors, and others are thematic ETFs that track an industry or concept. The JEDI ETF falls in the latter category.

The JEDI ETF includes companies that develop military drones, AI-driven warfare and defense technology, space products (including space weaponry), military robotics, and military cybersecurity. The stocks in the ETF receive at least 50% of their revenue from those sources.

Of note, no stock can have more than a 10% weighting of the entire index. That prevents any single name from getting too much exposure in the ETF. As of this writing, the JEDI ETF held 26 stocks, with Rocket Lab being the top holding. The top 10 stocks in the fund account for 64% of the ETF's weight.

Data source: Defiance ETFs

Rocket Lab is in excellent company. And yet, it's not even the top-performing name in the JEDI ETF over the last 12 months. That distinction goes to Saab AB, a Swedish defense company that makes fighter jets and provides cybersecurity solutions for the military, among other products. Kratos Defense is also an interesting company that has outperformed Rocket Lab -- it makes high-performance drones and satellite communications for space-based applications.

Palantir may be the best-known name among the company's top holdings. The data analytics company makes powerful software that can tap into satellite data and hundreds of data points worldwide to provide military and intelligence clients with real-time data and insights. The company's Artificial Intelligence Platform (AIP) and Foundry platform for commercial clients are also quickly growing in popularity.

How does Rocket Lab fit in the JEDI ETF?

Granted, some companies in the JEDI ETF have a much stronger military focus. Rocket Lab made 21 successful launches in 2025, and its customers include the U.S. Space Force, BlackSky Technology, Japan's national space agency, and others -- some of which are undisclosed.

Rocket Lab is also involved in NASA's Escapade mission to Mars, which launched Nov. 13 -- it supplied the spacecraft being transported by Blue Origin rockets to study the impact of solar wind on Mars' atmosphere.

But it has plenty of military work as well, including an $816 million contract awarded in December by the U.S. Space Development Agency to build missile-tracking satellites. It also has a $515 million contract to build a satellite communications network to send data to the U.S. military. Rocket Lab is also expected to bid on the Department of Defense's Golden Dome project, which would use ground-based and space-based missiles to intercept missiles.

President Donald Trump has said he wants to push the U.S. defense budget from $900 billion in 2026 to $1.5 trillion in 2027. Such spending is helping to fuel the massive profits in Rocket Lab and other stocks in the JEDI ETF.

While I'm always interested in high-flying stocks with great growth stories, I believe it's a much better idea to invest in ETFs that accomplish the same goal while providing instant diversification. The Defiance Drone and Modern Warfare ETF, launched in September 2025, is an ideal vehicle for investors who like Rocket Lab. While the ETF's expense ratio is a rather high 0.69%, or $69 per $10,000 invested annually, the fund is priced reasonably and the return compensates well in proportion to the fee.

Patrick Sanders has positions in Palantir Technologies. The Motley Fool has positions in and recommends AeroVironment, Kratos Defense & Security Solutions, L3Harris Technologies, Leidos, Palantir Technologies, RTX, Rocket Lab, and Saab Ab (publ). The Motley Fool has a disclosure policy.