Defense & Aerospace encompasses the development and production of systems for national security (defense) and civilian/commercial aviation (aerospace). This includes combat vehicles, naval vessels, aircraft, space systems, advanced precision machining tooling, and underlying electronics and intelligence technologies.

The theme is driven by structural increases in global defense budgets due to geopolitical tensions and the modernization of military equipment. In aerospace, long-term growth is supported by recovering air travel demand, high-precision machining requirements for heat-resistant superalloys, and the replacement of aging corporate and commercial fleets with more efficient aircraft.

• Pure Plays: Lockheed Martin, Northrop Grumman.
• Significant Exposure: General Dynamics Corporation (Marine Systems, Gulfstream jets), RTX (Raytheon/Pratt & Whitney).
• Adjacent Exposure & Precision Machining: Specialized component suppliers (TransDigm, HEICO), advanced aerospace cutting tools and heat-resistant machining (Sandvik AB (publ)).

• Budgetary Constraints: Fiscal consolidation in major economies could impact defense spending.
• Geopolitical Shifts: De-escalation of tensions could lead to reduced demand for defense systems.
• Technological Disruptions: Advancements in autonomous systems (drones, AI) could shift demand away from traditional platforms.
• Supply Chain Fragility: Highly specialized supply chains and critical raw material inputs (e.g. tungsten) are vulnerable to disruptions.

• 2026-04: General Dynamics Corporation reported record order activity with a book-to-bill ratio of 2.0x, signaling a robust multi-year growth cycle for the sector.
• 2026-04: Defense segments achieving higher order momentum (2.2x book-to-bill) compared to commercial segments.

• Robotics (Autonomous systems)
• AI Infrastructure (Intelligence systems)
• Maritime
• Factory Automation