In this article, we will take a look at the 10 Defense & Aerospace Stocks Gaining From Rising Geopolitical Spending.
Defense and aerospace stocks had a big year in 2025, helped by soaring geopolitical tensions and rising defense spending. Nothing seems to have changed with the US disposing Venezuela leader and triggering tensions in Europe over Greenland.
Scott Helfstein, senior vice president of investment strategy at Global X ETFs, expects another stellar year for defense and aerospace stocks given the geopolitical uncertainties. The S&P Aerospace & Defense Select Industry Index is already up by 14% year to date, outperforming the S&P 500, which is up by a partly 1% over the same period.
“We think that there is significant change going on geopolitically right now,” he said. “We just got the latest national security strategy out of the administration, and by and large, we’re moving to a world of decentralized deterrence and probably increased policy uncertainty.”
President Donald Trump’s call for a substantial increase in the US military budget is one tailwind behind defense stocks’ significant year-to-date gains. Trump has called for increasing the military budget to $1.5 billion, up from the $901 billion approved last year.
“This potential budget increase would offset the negative investor sentiment from the potential capital allocation restrictions, but there is significant uncertainty associated with a final defense budget,” RBC Capital Markets analysts led by Ken Herbert said.
Analysts at Morgan Stanley also expect defense stocks to post significant gains as countries across the bloc increase their military spending, rattled by the unending threat. European companies are poised to boost their defense budget to up to 3% of GDP, which is expected to result in 140% to 240% increase in spending on equipment.
Amid the soaring geopolitical uncertainties and an increase in defense spending across the globe, let’s take a look at some of the Defense & Aerospace Stocks Gaining From Rising Geopolitical Spending.
Source: Pexels
Our Methodology
To compile our list of defense & aerospace stocks gaining from rising geopolitical spending, we settled on stocks that have outperformed the S&P 500 Index (up +0.4%) on a year-to-date basis, and have gained at least 5% so far in 2026. Finally, we ranked the stocks in ascending order based on the number of hedge funds that hold stakes in them, as of Q3 2025.
Note: All data was sourced on January 25.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research shows we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
Defense & Aerospace Stocks Gaining From Rising Geopolitical Spending
10. Textron Inc. (NYSE:TXT)
Year to Date Gain: 10.96%
Number of Hedge Fund Holders: 36
Textron Inc. (NYSE:TXT) is one of the defense & aerospace stocks gaining from rising geopolitical spending. On January 20, Textron Inc. (NYSE:TXT) secured a $163.4 million contract through the Ukraine Security Assistance Initiative (USAI) via the Foreign Military Sales (FMS) mechanism.
Under the terms of the contract, the company is to provide 65 Mobile Strike Force Vehicle MSFV Commando Select vehicles and one year of spare parts. It also covers the build and delivery of new cars to strengthen Ukraine’s military.
“Textron Systems has delivered hundreds of COMMANDO vehicles to the U.S. Army over the last two decades,” said David Phillips, Senior Vice President, Air, Land and Sea Systems. “The COMMANDO Select has demonstrated support to soldiers, serving as a combat-proven armored personnel carrier performing secure personnel movement, military police and constabulary operations as well as command and control operations to support ground mobility missions.”
Earlier on January 15, analysts at Jefferies raised Textron Inc.’s price target to $115 from $95 and reiterated Buy ratings. The price target underscores the research firm’s confidence that the company will deliver solid financial results and guidance. The research firm expects the company to post fourth-quarter earnings of $1.41 per share. It also expects 2026 guidance of $6.30 to $6.50, in line with the firm’s estimate of $6.30.
Textron Inc. (NYSE:TXT) is a global, multi-industry company that designs, manufactures, and sells aircraft (Bell, Cessna, Beechcraft), defense products (Textron Systems), and industrial products (Jacobsen, E-Z-GO, Arctic Cat). It provides financial services and is known for its powerful brands in the aerospace, defense, specialized vehicles, and industrial sectors.
9. AeroVironment, Inc. (NASDAQ:AVAV)
Year to Date Gain: 21.08%
Number of Hedge Fund Holders: 37
AeroVironment, Inc. (NASDAQ:AVAV) is one of the defense & aerospace stocks gaining from rising geopolitical spending. On January 21, analysts at Citizens reiterated a Market Outperform Rating on AeroVironment, Inc. (NASDAQ:AVAV) and set a $400 price target.
According to Citizens, the company is well-positioned to benefit from tailwinds in the US and from global defense priorities driving rapid funding and procurement in key aerospace domains. A merger with BlueHalo is also expected to create a scaled design-to-production engine across the drone and cyber spaces. In addition, the company can capitalize on its strong international base as a second growth engine.
RBC Capital has also reiterated an Outperform rating and a $375 price target on the stock, despite the company receiving a stop-work order from the US Department of Defense regarding the BADGER phased-array antenna system. The program was expected to generate about $175 million in revenue in fiscal 2026, with a larger share in the second half of the year.
AeroVironment, Inc. (NASDAQ:AVAV) is a defense technology leader that creates intelligent, multi-domain robotic systems, including drones (UAS), loitering munitions (e.g., Switchblade), and counter-UAS (C-UAS) solutions for defense, government, and commercial clients.
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