Trump’s $1 Trillion Military Blitz: 2 More Defense Stock Winners to Buy Now
Jane Johnson ; 2025-10-20 10:51:27
Key Points
- President Trump’s $1.01 trillion defense budget proposal marks a 13% increase for 2026.
- The plan focuses on cyber, space, AI, and hardware to counter global threats.
- While the world’s largest defense contractors will get big wins, other defense stocks will also benefit substantially.
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President Trump has proposed a $1.01 trillion defense budget for fiscal year 2026, marking a 13% increase from the previous year’s enacted levels. This boost targets strengthening U.S. military readiness against global threats, with key allocations for cyber security, space capabilities, AI integration, and equipment upgrades.
For defense contractors, this means expanded opportunities in procurement and research and development, potentially adding billions of dollars in contracts over multiple years. The plan prioritizes naval fleet growth, missile systems, ground vehicles, and advanced electronics to maintain strategic edges.
While the three largest U.S. defense contractors —Lockheed Martin(NYSE:LMT),RTX(NYSE:RTX), andNorthrop Grumman(NYSE:NOC) — will secure large portions through flagship programs such as fighters and bombers, the spending surge creates broader gains. This could enhance revenues, support stock rallies, and provide predictable income streams amid economic uncertainties.
Although risks to the final tally approved include budget debates in Congress, approval seems likely given bipartisan support for defense. That means the two defense stocks below also stand to benefit from this plan.
General Dynamics (GD)
General Dynamics(NYSE:GD) operates across marine systems, combat vehicles, and IT services, positioning it well for the budget’s focus on shipbuilding and land forces.
Its Electric Boat division handles Virginia-class submarines, expected to see increased orders as the Navy aims to expand its undersea fleet. Bath Iron Works contributes to destroyer programs like Arleigh Burke, directly tied to naval modernization funds.
On the ground side, GD’s Abrams tanks and Stryker armored fighting vehicles benefit from army upgrades — a recent $202 million follow-on contract signal steady order flow — especially with ongoing needs in Ukraine and potential Middle East escalations. The IT arm gains from cyber and data analytics investments.
Loading stock data...General Dynamics’ market cap stands at $92.4 billion, with a trailing P/E of 23 and year-to-date gains of 30%. Wall Street currently has a consensus hold rating on GD stock and a $340 per share price target, implying it is fairly valued at $343 per share. Yet investors should still buy now due to its existing $95 billion backlog that gives it earnings stability Geopolitical tensions amplify demand, making GD a reliable hold for growth.
Beyond military hardware, General Dynamics also has a civilian aerospace division in Gulfstream that diversifies its revenue and mitigates some of the risks associated with pure defense plays. Analysts forecast 11% to 12% EPS growth over the next two years, driven by margin expansions from supply chain efficiencies.
With a 1.8% dividend yield and 34-year payout history, GD offers additional appeal to income-focused investors eyeing long-term stability in a volatile sector.
L3Harris Technologies (LHX)
L3Harris Technologies(NYSE:LHX) specializes in communications gear, sensors, and space systems, aligning with the budget’s emphasis on electronic warfare and missile defense. Its tactical radios and night vision tech support integrated defenses, while space sensors aid satellite programs.
The company stands to gain from drone countermeasures and secure networks, areas with proposed funding hikes. LHX recently upped 2026 revenue targets to $23 billion, backed by a $34 billion backlog and $1.2 billion in cost savings from efficiency drives.
Loading stock data...With a market cap of $55.4 billion and a forward P/E of 18 for a stock trading at $297 per share, consider buying now as strong cash flows enable dividends and acquisitions, plus NATO spending trends boost international sales. LHX’s tech focus offers high-margin growth in a trillion-dollar environment.
The firm’s Aerojet Rocket Engines acquisition enhances propulsion capabilities for hypersonic and missile projects, which are key budget priorities. International exposure, at 20% of sales, also benefits from allied nations’ rearmament, including a $1.1 billion contract with Netherlands in March for communications systems.
Free cash flow hit $2.1 billion last year, funding R&D in AI-driven sensors. With a beta of 0.7, LHX provides lower volatility than peers, ideal for balanced portfolios seeking defense upside without excessive swings.