GE Aerospace, Boeing, among 12 defense stocks to watch as global military spending surges

Global defense spending is poised for significant acceleration, with the US budget projected to exceed $1 trillion by FY2026 and European outlays nearing $1 trillion by 2035, driven by intensifying geopolitical conflicts. This trend has fueled strong market performance, exemplified by the Global X Defense Tech ETF's 63% surge in 2025. While 22V Research identifies 12 defense stocks with notable technical strength, Northrop Grumman and General Dynamics are highlighted as contrarian opportunities; despite robust earnings and favorable long-term prospects from major defense programs, they trade at attractive valuations due to comparatively muted Wall Street sentiment, suggesting potential upside for investors.

Analysis

The global defense sector is experiencing a powerful secular uptrend, underpinned by firm policy commitments and escalating geopolitical instability. Projected defense budgets are set to surpass $1 trillion in the U.S. by fiscal year 2026 and collectively in Europe by 2035, creating a durable demand backdrop for the industry. This has translated into significant market gains, evidenced by the Global X Defense Tech ETF's (SHLD) 63% surge in 2025, a rally that is broad-based with the average stock in the ETF advancing 15% excluding the outsized impact of Palantir (PLTR). While technical analysis from 22V Research highlights momentum in 12 specific U.S. and European defense stocks, including GE Aerospace (GE) and Boeing (BA), a compelling contrarian opportunity exists in Northrop Grumman (NOC) and General Dynamics (GD). Despite robust quarterly results and forecasts for double-digit earnings growth, these two firms garner muted Wall Street sentiment, with only 44% of analysts issuing a 'Buy' rating. This skepticism contrasts with their attractive price-to-earnings ratios and their strategic alignment with key future programs, such as Northrop's B-21 bomber and General Dynamics' role in U.S. naval expansion, suggesting a potential dislocation between market perception and fundamental value.

Key Decisions for Investors

• Given the sustained and accelerating global defense spending cycle, investors should consider maintaining or increasing strategic exposure to the defense sector through a diversified basket of prime contractors or sector-specific ETFs.
• Evaluate Northrop Grumman and General Dynamics as potential contrarian investments, as their current valuations and muted analyst sentiment appear disconnected from their strong fundamentals, double-digit earnings growth outlook, and alignment with major government programs.
• Investors should distinguish between short-term technical signals and long-term fundamentals; while a curated list of stocks shows strong momentum, high-flyers like Kratos and AeroVironment may face near-term pullbacks, potentially offering more attractive entry points for fundamentally-driven positions.