While the U.S. government is planning significant increases in defense spending for 2026, most of those plans have not yet translated into contract awards or hiring. Some of the anticipated spending is already reflected in defense stock prices, but the prolonged and often opaque appropriations process has left many individual investors uncertain of who will be the winners and losers of the military expansion.
For investors seeking exposure to defense industry growth, this may be the moment to reassess watchlists and begin positioning portfolios.
Here’s the state of play: About $150 billion of the White House’s proposed $1.01 trillion in defense spending has already been appropriated, within the One Big Beautiful Bill Act, or OBBBA, including theGolden Domeanti-missile initiative and $10.8 billion to modernize the U.S. nuclear arsenal.
Meanwhile, both House and Senate appropriations committees have advanced versions of the FY2026 Defense Appropriations Act. And the president signed the $901 billion National Defense Authorization Act (NDAA) in December, an important precursor to appropriations.
To be sure, the defense sector is already a beneficiary of market tailwinds—including the many geopolitical conflicts underway that require, or threaten to require, some level of U.S. involvement. And defense equities have already repriced meaningfully in 2025. But if and as the funding outlook becomes more certain, more upside is likely to follow, and for a broader range of stocks.
For starters, investors should keep in mind that several large and critical initiatives are still in line for federal funding, even though they were not authorized by the NDAA. These include:
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$3.9 billion for hypersonic weapons,
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$3.5 billion for upcoming F-47 fighter jets,
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$2.5 billion for increased production of missiles and munitions,
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$15.1 billion for cybersecurity,
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and a 30% increase in Space Force funding to $40 billion.
Moreover, the defense department has asked companies whether they can “quickly” build about 300,000 drones, signaling that firms in that sector are likely to win large contracts in the future. The administration has also indicated that it expects passage of a follow-on reconciliation bill in the coming months that will provide the Pentagon with an additional $113.3 billion for FY2026.
Lockheed Martin (LMT), with a low forward price-earnings ratio of 16, should get a lift from the Pentagon’s request for 245 of its PAC-3/MSE missiles. Lockheed should also benefit from the Trump administration’s decision to seek nearly $400 million for production of the firm’s new hypersonic weapon.
