Top Defense Stocks to Watch in 2026
As global defense budgets soar, particularly across the United States and the European Union, military investments in cutting-edge technology like artificial intelligence (AI) and drones are on the rise. For savvy investors, this pivot presents a lucrative opportunity to capitalize on key players driving the next wave of defense innovation.
1. Dassault Aviation: Taking Flight with AI
The French aeronautics pioneer, Dassault Aviation (EPA: AM), is renowned for its production of advanced fighter jets such as the Rafale. Its stock has climbed a remarkable 52.94% over the past 12 months, now priced at €312.60 ($362.89) as of January 2026.
The growth trajectory is fueled by Dassault’s recent $200 million investment into Harmattan AI, a cutting-edge startup developing scalable, autonomous AI systems. This partnership is expected to enhance Dassault’s capabilities in electronic warfare, drone interception, and advanced intelligence systems, making it a key player in Europe’s ongoing defense rearmament program, worth nearly $1 trillion.
2. Howmet Aerospace: A Legacy of Innovation
Howmet Aerospace (NYSE: HWM), founded in the late 19th century, continues to demonstrate impressive performance as a core supplier for defense titans like Lockheed Martin. In the past year, its stock has soared by 82.81%, now valued at $224.82, thanks to a 14% revenue growth in 2025. The company’s pivot to high-margin aftermarket services solidifies its position as a critical player in engine component manufacturing.
Investors are bullish on Howmet’s prospects, especially with U.S. defense budget increases anticipated under new proposals. Its reliance on supplying integral components for aerospace giants ensures sustained growth.
3. Mercury Systems: High-Tech Defense Essentials
Mercury Systems (NASDAQ: MRCY) specializes in delivering mission-critical processing technologies vital for aerospace and defense applications. The company’s stock hit an all-time high in January 2026, surging 40.99% year-to-date to $102.94. A significant catalyst for this growth comes from a $60 million contract for U.S. space weapons programs, further cementing its long-term relevance in the defense sector.
With expertise in radiation-hardened technologies and robust government partnerships, Mercury Systems remains a reliable bet for investors seeking stability and long-term growth.
Why Defense Stocks Are the Future
The continuous modernization of military arsenal across nations is heavily reliant on technological innovation. For example, AI-powered drones for surveillance and precision targeting are becoming key assets. This trend creates steady demand, making defense stocks resilient, even during economic downturns.
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