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 a 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 Corp. (RTX), and Howmet Aerospace (HWM).
“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, aerospace giant Boeing, and the 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, multi-year contract for the production of 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 Corp. 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 and designed 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, with a four-year delivery timeline, per CSIS.
AT SEA, UNSPECIFIED – FEBRUARY 28: Arleigh Burke-class guided-missile destroyer USS Frank E. Petersen Jr. (DDG 121) fires a Tomahawk Land Attack Missile during operations in support of Operation Epic Fury, on February 28, 2026 at Sea. (Photo by U.S. Navy via Getty Images) · U.S. Navy via Getty Images
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 on the FY 2026 enacted budget, the sum would stand as the largest single year of funding since World War II.
And the spending boom is giving business to more than just traditional defense contractors. Boeing in April signed a 7-year agreement with the Defense Department for production of 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.
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