Defense stocks surge as governments boost spending on weapons, AI battlefield technology
Jake Conley· Breaking Business News Reporter
Tue, July 7, 2026 at 6:51 PM GMT+5:30
5 min read
Defense stocks are surging as investors bet that rising military budgets, efforts to replace depleted weapons stockpiles, and the race to deploy artificial intelligence across the battlefield will benefit the often-staid sector
The momentum was enough to push the iShares U.S. Aerospace & Defense ETF (ITA) to its first intraday record high in four months on Monday, boosted by advances throughout the past month in a number of defense sector names, including GE Aerospace (GE), Boeing (BA), RTX (RTX), and Howmet Aerospace (HWM)
(ITA)
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245.11-5.67(-2.26%)
At close: July 7 at 4:00:00 PM EDT
“As geopolitical tensions rise and countries assume greater responsibility for their own security, governments are increasing investments in military capabilities,” Franklin Templeton chief market strategist Stephen Dover and head of research Larry Hatheway wrote in a report for clients
At the same time, they said, “Rapid technological change is also rendering many traditional defense systems obsolete, creating demand for advanced weapons, cybersecurity, space-based defenses and modernized military infrastructure.”
Renewed spending push
In late June, President Trump summoned the heads of several major US manufacturers who play key roles in the defense supply chain, including Lockheed Martin (LMT), aerospace giant Boeing, and industrial manufacturing giant Honeywell (HON), to discuss a push to quickly ramp up production of key weapons systems to rebuild depleted munitions stockpiles
Days later, the Department of Defense awarded Lockheed Martin a $35.3 billion multiyear contract to manufacture Terminal High Altitude Area Defense (THAAD) missiles, which cost $15.5 million per unit to produce, according to the Center for Strategic and International Studies
RTX was awarded a roughly $400 million contract for medium-range air-to-air missiles. That deal comes after an earlier contract awarded to RTX in early February to dramatically enhance the company’s production of long-range Tomahawk missiles, more than 1,000 of which were expended by the US during the war in Iran. Tomahawks cost $2.6 million per unit to build and have a four-year delivery timeline, per CSIS
Bolstering these contracts is the Department of Defense’s fiscal year 2027 budget request to Congress. At $1.5 trillion, which would represent a 44% increase over the FY 2026 enacted budget, the sum would be the largest single-yearfunding since World War II
The spending boom is giving business to more than just traditional defense contractors. In April, Boeing signed a seven-year agreement with the Defense Department to produce PAC-3 interceptor missiles. Two months later, the company was awarded a $2 billion contract by the US Space Force to build an array of communications satellites
