Global defense spending is poised to accelerate as conflicts in Europe, the Middle East, and rising tensions in Asia intensify demand for new technologies and weaponry.
The US defense budget is projected to surpass $1 trillion in fiscal year 2026, while European nations, spurred by fresh commitments under the Trump administration, are expected to nearly double their collective outlays to around $1 trillion by 2035.
“Defense spending commitments provide a policy floor, while geopolitical uncertainty supplies the premium, together defining the transatlantic defense sector backdrop,” said Kim Wallace, managing director and head of Washington policy research at 22V Research.
The strength in defense spending has been reflected in markets.
The Global X Defense Tech exchange-traded fund is up 63% in 2025, thanks in large part to its largest holding, Palantir Technologies.
But the rally has been broad-based, with the average stock in the ETF, excluding Palantir, advancing 15% this year.
GE Aerospace, Boeing, Rolls-Royce Holdings among others show notable technical strength
According to 22V Research, reported by Barron’s, of more than 50 defense stocks analyzed, 12 showed notable technical strength.
Nine are based in the US and three in Europe.
Names on the list include GE Aerospace, RTX, Boeing, General Dynamics, Northrop Grumman, Axon Enterprise, L3Harris Technologies, Curtiss-Wright, BWX Technologies, as well as European firms Safran, Rolls-Royce Holdings, and Leonardo.
Some top-performing stocks, such as drone makers Kratos Defense & Security Solutions and AeroVironment, did not make the list despite surging 90% and 40%, respectively, in the past three months.
Analysts note that their absence has less to do with fundamentals and more with technical signals suggesting a near-term pullback.
Contrarian opportunities in Northrop and General Dynamics
While Wall Street broadly favors 10 of the 12 highlighted stocks, sentiment is more muted on Northrop Grumman and General Dynamics.
Only 44% of analysts rate the shares a Buy, compared with an average 55% across the S&P 500 and about 70% for the other defense stocks on 22V’s list.
Yet, both companies recently reported robust quarterly results and are trading at price-to-earnings ratios below the broader market, even as analysts forecast double-digit earnings growth in the coming years.
General Dynamics, a key supplier of tanks and destroyers, stands to benefit from the Trump administration’s emphasis on expanding US naval capacity.
Northrop Grumman, builder of the B-21 stealth bomber, is well-placed to secure contracts tied to the proposed Golden Dome missile defense system.
For investors, these two companies could represent contrarian opportunities where Wall Street skepticism may be overstated.
With geopolitical instability likely to persist, defense remains a sector where both policy and profit potential are firmly aligned.
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