The defense technology sector appears to be the biggest gainer as the global geopolitical situation has gone from bad to worse, thanks to actions and counteractions from aggrieved parties in the Middle East, with the world’s largest economy getting dragged into the hostilities.
As strikes on Iranian nuclear facilities now turn the spotlight on the tools of modern warfare — particularly those of high-tech caliber — investors are moving into positions to leverage the opportunities from the escalating crisis.
Defense tech investments and collaborations have exploded in recent days
With the talk of World War III dominating headlines, defense tech companies have started attracting heavy investments as countries prepare for the worst.
Shares in Palantir, a data-crunching US company linked to the Pentagon, have also gone up by more than 80% this year, and its $325 billion market capitalisation is quadruple that of traditional defense companies like BAE Systems.
To keep up with the growing demand, companies in the sector will need to secure supply chains, close deals with prime contractors, and also get their hands dirty.
One issue that could pose a threat to this happening is gutted supply chains, an issue complicated by the geopolitical tension across the globe.
One company, Airo, known to deal in drones and avionics, has already highlighted “limited suppliers” in Europe and Canada for critical components and raw materials as an issue. To deal with this, companies like Helsing and Anduril have been investing in tie-ups.
Helsing is reportedly buying composite aircraft manufacturer Grob Aircraft and has partnered with Sweden’s Saab. At the same time, US peer Anduril Industries has made several acquisitions, including Adranos, and has also joined forces with Rheinmetall to develop drones for Europe.
Built with Europe, for Europe.
Today we’re announcing a strategic partnership with @RheinmetallAG to co-develop & deliver Anduril’s Fury, Barracuda & solid rocket motors to European militaries. pic.twitter.com/FwZfEwF9AH
— Anduril Industries (@anduriltech) June 18, 2025
Bavarian military software developer Blackned has also teamed up with the German defense prime, and the pair have secured a €1.2 billion contract from the German Bundeswehr.
The EU is aiding the defense industry in the face of excess demand
Despite the increased demand, access to finance, from equity to bank loans, is still tricky for the smaller players.
Venture capital debt has been plugging some holes, but governments are also stepping in. This month, for example, the EU’s lending arm reportedly tripled its loan plan for defense industry SMEs to €3 billion.
The initiative is part of the EIB’s Pan-European Security and Defence Lending Envelope, aimed at bolstering Europe’s defense capabilities amid heightened geopolitical tensions.
The expanded €3 billion scheme will focus on providing intermediated financing to SMEs and mid-cap companies within the EU’s security and defense supply chain, as these businesses are recognized as critical suppliers to major defense manufacturers like Airbus, Thales, Rheinmetall, and Leonardo.
Historically, wherever capital flows, advancements follow, even if only through trial and error. During the Second World War, many designs passed the check on the drawing board but failed in the field. With further escalation in sight, defense companies and their investors may see it as an opportunity to test, refine, push products, and make gains faster than during peacetime.
