US investors are piling into defence stocks as wars from Ukraine to the Middle East drive a multi‑year spending surge. State Street’s Matthew Bartolini says geopolitics has turned defence from a cyclical trade into a durable demand story. Public pension commitments to defence‑focused private equity more than doubled between 2022 and 2025, even as overall private‑equity pledges slipped, as a hedge.

First‑quarter data show US‑listed defence ETFs attracting $4.8bn of net inflows, a jump from $283 million a year earlier. The S&P Aerospace & Defense index has surged 142 % since Russia’s 2022 invasion, outpacing the broader S&P 500’s 64 % gain. Meanwhile, AI‑driven start‑up Anduril Industries lifted its valuation from $14bn to $60bn, underscoring investor appetite for next‑gen weaponry and long‑term growth prospects.

The funding boom has helped firms like Arlington Capital raise a $6bn defence fund, a 57 % increase over its predecessor, while Invesco’s aerospace ETF swelled to $8.4bn from $653 million since 2022. Some analysts warn valuations are now growth‑adjusted overpriced, prompting a modest pullback. Nevertheless, capital is flowing, confirming defence as a core theme for institutional portfolios for future defense spending.