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Defense Stocks Soar: New Dawn for Military Investors
21 Dec, 2025
Summary
- New defense upstarts show tech-like growth, doubling stock prices.
- Ukraine conflict and geopolitical shifts boost military spending globally.
- Defense sector surpasses S&P 500 and even Magnificent Seven tech gains.
The landscape of military contractors is shifting, with new, agile companies emerging alongside traditional giants. Upstarts such as Kratos Defense & Security Solutions and Palantir Technologies are achieving tech-firm valuations, with their stock prices at least doubling this year. This transformation is partly fueled by changing warfare dynamics, exemplified by Ukraine's drone-centric defense, and a global increase in military spending.
Nations worldwide are reevaluating their defense capabilities, with some European and Asian countries significantly boosting their budgets. This trend benefits US contractors as well. The S&P 1500 Aerospace and Defense group has seen a substantial 41% jump this year, significantly outperforming the S&P 500 and major tech stocks. European defense firms are also experiencing rallies as their respective governments increase military investments.
Even established companies like Lockheed Martin and RTX Corp. are seeing strong returns. Investors are enthusiastic about US military spending initiatives, including missile defense programs. Despite potential policy shifts regarding buybacks and dividends, the excitement surrounding the defense sector remains robust as it enters a new era.
