How and Why to Invest in the Defense Industry

At first glance, it may not seem obvious, yet investing in the defense sector can be a profitable strategy. Investing in defense means betting on a growing industry—one with strong order books, substantial government support, and underlying sovereignty considerations. However, this type of investment also comes with ethical considerations that must be taken into account. What does investing in defense really mean? What investment vehicles are available? What returns can you expect, and what risks are involved? Let’s break it down.

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What Does Investing in Defense Involve?

Investing in defense means allocating part of your capital to a sector where the economy, advanced technology, and strategic sovereignty intersect. Like other types of investments, defense sector investments can be made through various vehicles:

• Shares of publicly traded defense companies such as Dassault Aviation, Thales, Safran, Airbus Defence & Space, or Rheinmetall in Germany.
• Investment funds or ETFs (Exchange Traded Funds) dedicated to the defense and security sector
• Thematic funds
• Life insurance policies and retirement savings plans (PER)

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Investing in Defense: A Sector at the Intersection of Economy and Sovereignty

The defense industry encompasses a wide range of companies that design, produce, and sell military equipment: fighter jets, armored vehicles, missile systems, ships, satellites, as well as cybersecurity and artificial intelligence applied to military applications.

In France, the defense industrial and technological base (BITD) includes nearly 4,500 companies and over 220,000 direct jobs. Major players such as Dassault Aviation, Thales, Safran, Airbus, and Nexter drive a network of innovative SMEs, particularly in cybersecurity and AI. This industry forms a complete and robust ecosystem essential for both economic growth and national sovereignty.

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Why Invest in Defense?

A Strong European and Global Growth Trend

Whether in Europe or elsewhere, defense investment is growing rapidly, and further acceleration is expected. The numbers speak for themselves: in 2024, global military spending reached a record $2.7 trillion, up nearly 10% year-over-year.

At the NATO summit in The Hague in June 2025, the 32 member states committed to an ambitious new budget trajectory: raising defense and security spending to 5% of GDP by 2035. This commitment is split into 3.5% for direct military expenditures and 1.5% for related spending—such as cybersecurity, critical infrastructure protection, and civil preparedness.

Some European countries already exceed 3.5% of GDP:

• Poland: 4.48%
• Lithuania: 4%
• Latvia: 3.73%
• Estonia: 3.38%

France is around 2.05% but plans to invest €413 billion over seven years (2024–2030) under its Military Programming Law. The “Defense Mission” budget already reaches €50.5 billion in 2025, up €3.3 billion from 2024, representing 2.06% of GDP. It is expected to increase gradually to about €68 billion by 2030, and potentially €100 billion annually by 2035 if France aligns with NATO’s trajectory.

European defense spending varies across countries:

• Germany: ~2.4% of GDP in 2025, target 3.4% by 2029
• United Kingdom: 2.5% of GDP by 2027, 3% by 2029
• Spain: increasing from 1.4% to 2% of GDP in the short term

In the United States, the defense budget rose 5.7% in 2024, reaching $997 billion.

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Solid Economic Prospects

Unlike sectors that follow traditional economic cycles, the defense industry benefits from consistent long-term government support. Orders are often multi-year, even decade-long, providing visibility for companies—and, by extension, for investors.

Example: Dassault Aviation, with its Rafale fighter jet, has secured over 300 firm export orders. Thales has an order book exceeding €25 billion.

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Diversification and Strong Performance

Investing in defense allows portfolio diversification into a robust and resilient sector, less sensitive to economic crises. Between February 2022 and February 2025, European defense stocks surged +259%. Some companies, like Rheinmetall in Germany, even saw their stock prices jump over 170% since the start of 2025.

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Europe’s reindustrialization in defense: a driver of carbon price growth

Europe has set a new objective: to raise its defense spending to 5% of GDP. This strategic shift involves a massive revival of industrial production — steel, armored vehicles, trucks, ammunition, aircraft, ships… all highly energy-intensive and carbon-emitting sectors.
These industries fall directly under the European carbon market (EU ETS): for every ton of CO₂ emitted, they must purchase an emission allowance. This industrial rebound is therefore creating a structural increase in demand for allowances, exerting upward pressure on their price. This trend opens a new investment opportunity in EUAs as of October 2025, with the price of 1 ton of CO₂ currently around €78.

It is one of the three major macroeconomic dynamics expected to drive carbon prices higher in the coming years — alongside the decline in oil prices, which boosts consumption, and the rise of artificial intelligence, a rapidly growing source of energy demand.

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Strategic Sovereignty

Investing in defense also supports France’s and Europe’s strategic autonomy and sovereignty. By directing savings into this sector, individuals indirectly contribute to military modernization, technological development, and national and European security.

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Risks and Constraints of Defense Investment

Like any sector, defense investment comes with specific risks and constraints:

Ethical considerations
Investing in arms companies raises moral questions and may conflict with the values of certain investors.

Market volatility
Even with strong government order books, defense stocks remain exposed to:

• Political decisions affecting military budgets
• Geopolitical tensions (conflicts can either boost or delay programs)
• Currency and raw material fluctuations (steel, electronics, fuel)

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How to Invest in the Defense Sector

There are several ways to invest in defense.

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Direct Investment in Stocks: Defense Company Shares

You can buy publicly traded shares of defense companies. Key European players include:

• Dassault Aviation (France) – fighter jets, Rafale
• Thales (France) – cybersecurity, satellites, radars, weapons systems, missiles
• Safran (France) – aircraft engines and aeronautical equipment
• Airbus (Europe) – military aircraft, helicopters, satellites
• Rheinmetall (Germany) – armored vehicles, ammunition, weapons systems
• Leonardo (Italy) – helicopters, defense electronics

Advantages: high liquidity, strong potential returns
Disadvantages: high volatility, dependent on military budgets

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Defense ETFs (Exchange Traded Funds)

ETFs allow investment in a basket of defense stocks. Examples:

• WisdomTree Europe Defence ETF: invests in around 20 European companies
• VanEck Defence ETF: global focus, but dominated by U.S. companies

Advantages: portfolio diversification, low entry point (~€100)
Disadvantages: limited European options, some not eligible for PEA

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Thematic Funds

Several asset managers offer defense-focused thematic funds:

• CPR Invest – European Strategic Autonomy
• Tikehau European Sovereignty Fund

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Focus: Bpifrance Defense Fund

What is the Bpifrance Defense Fund?
The Bpifrance Defense Fund is an upcoming investment vehicle enabling individuals to invest in companies active in the defense sector.

• Funded at €450 million
• Aims to finance French companies strategic for defense and national security
• Open to individuals from €500
• Private equity fund targeting non-listed SMEs and innovative start-ups
• Objectives: industrial scale-up, secure supply chains, encourage breakthrough innovation (AI, energy, new materials)
• Expected returns: 7–10% annually (not guaranteed)
• Commercial launch: second half of 2025

Key Features:

• Minimum ticket: ~€500
• Accessibility: open to individuals
• Targeted sectors: start-ups, SMEs, non-listed mid-cap companies in defense, cybersecurity, high-tech
• Expected performance: 7–10% per year depending on risk and company profile

Advantages: professional portfolio management
Disadvantages: potential management fees, risk of capital loss

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Life Insurance and Retirement Savings Plans (PER)

Many multi-support life insurance policies and PERs now offer defense-linked units (funds, ETFs, stocks).

Advantages: favorable tax framework, possibility to mix with safer investments like euro funds
Disadvantages: returns may be lower than other vehicles, PER funds are locked for several years

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The Future “Defense Savings Plan”

Announced in 2025 by the French government, the “Defense Savings Plan” has yet to be launched. Once available, it is expected to channel part of national savings into strategic defense companies, potentially offering an attractive investment vehicle for individuals wishing to participate in national sovereignty.

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Comparative Table of Defense Investment Vehicles

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Current Trends in the Defense Industry

Investing in defense is considered promising due to strong underlying trends:

• Cybersecurity: governments prioritize protection of critical infrastructure
• Military drones and AI: high growth, driven by innovative European start-ups (Helsing, Preligens, Unseenlabs)
• Ground and air equipment: accelerated modernization of aging fleets
• European sovereignty: reducing dependency on the U.S. for strategic equipment

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Our Advice for Investing in Defense

• Clarify your goals: are you seeking short-term gains or long-term investment?
• Diversify your vehicles: combine stocks, ETFs, and funds to limit risks and optimize returns
• Maintain a long-term horizon: defense cycles depend on political and geopolitical decisions; a long-term approach is recommended

Defense investment can be made via various vehicles: stocks, ETFs, thematic funds, life insurance, and soon, a dedicated savings plan. This sector offers attractive return prospects, solid growth, and portfolio diversification—but also raises ethical questions, stock market volatility, and political risks.

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In summary:

• For experienced investors, defense is an interesting diversification option
• For newcomers, starting with thematic funds or ETFs is safer than direct stock investment
• In any case, the defense industry is likely to remain a cornerstone of European financial markets in the years ahead

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