Defense Stocks Surge on Trillion-Dollar Budget Talk

Lou Whiteman, The Motley Fool

Tue, Apr 8, 2025, 9:24 AM 3 min read

The White House is signaling a large boost successful defence spending arsenic portion of the fiscal 2026 national budget, and investors are sending defence stocks soaring higher arsenic a result.

Shares of defence contractors including Lockheed Martin (NYSE: LMT), RTX (NYSE: RTX), Huntington Ingalls Industries (NYSE: HII), General Dynamics (NYSE: GD), and AeroVironment (NASDAQ: AVAV) are each up 5% oregon much arsenic of 10:30 a.m. ET, portion shares of Science Applications International (NASDAQ: SAIC) are up 3%.

Defense investors person been successful a holding signifier of late. While fewer authorities observers expected a melodramatic pullback successful spending, a absorption connected ratio and speech of concern successful tech alternatively of caller hardware has near investors connected edge.

President Donald Trump cleared immoderate of that uncertainty connected Monday night, saying the authorities has "essentially approved a budget" that would allocate astir $1 trillion to defense. Defense Secretary Pete Hegseth followed up connected the X societal media platform, confirming the $1 trillion figure.

By comparison, the 2025 defence spending is projected astatine astir $951 billion. Neither fig includes supplemental backing added by Congress oregon backing for atomic programs that is allocated nether the Department of Energy budget.

We don't yet person details connected wherever precisely the wealth volition beryllium allocated, but the comments would look to suggest that the defence hawks wrong the medication -- those who privation to spot greater defence spending -- person won the interior statement against those looking to trim authorities outlays.

It had ever seemed improbable that defence spending would beryllium dramatically cut, but Tuesday's defence banal rally tin beryllium interpreted arsenic capitalist alleviation that the worst-case script is seemingly disconnected the table. With geopolitical tensions connected the emergence globally, determination is apt to beryllium important request for defence products for years to come.

For semipermanent investors, defense stocks tin connection an charismatic premix of income via dividends and humble but reliable growth. But investors request to recognize these are long-cycle industries, and that backing awarded contiguous volition instrumentality years to deed the companies' bottommost lines.