> ## Content Index > Fetch the complete content index at: https://etf-alert.ghost.io/llms.txt > Use this file to discover other available public pages before exploring further. # Top Defense ETFs to Watch in 2025 - URL: https://etf-alert.ghost.io/top-defense-etfs-to-watch-in-2025/ - Published: 2025-09-10T16:28:02.000Z - Updated: 2026-07-29T11:17:27.000Z - Description: Unlock the defense sector's explosive growth - Author: Etf Alert - Tags: ETF Market, Defense, Geopolitics, ETFs, 2025, Outlook, Global Economy, Expert Analysis, Newsletter, #Migrated-1785323302135, #Import 2026-07-29 11:14 While most investors are chasing AI and crypto, the smart money has quietly moved into a sector that's delivering huge returns. We're talking about **82% gains in under a year** while the market struggled to break even. The defense sector isn't just having a moment; it's entering what analysts are calling a "supercycle" that could run for the next decade. --- ### The Numbers Don’t Lie Global military spending exploded to **$2.7 trillion in 2024**, the biggest surge since WWII ended. But this isn't some temporary blip driven by a single conflict. This is a fundamental shift in how nations think about security. NATO just made a commitment: **5% of GDP on defense by 2035**. They're more than doubling their previous target, creating a **$4.2 trillion annual market** by the mid-2030s. Think about what that means for defense contractors. --- ### Defense ETFs to Focus On Let's cut to the chase. Here are the seven funds that investors are using to ride this wave. #### Global X Defense Tech ETF (SHLD) - **YTD Return: +82.4%** - **Why it's crushing it**: Pure play on defense tech, heavy in AI and cybersecurity - **The risk**: Higher volatility, newer fund - **Insight:** If you want maximum upside and can handle the swings, this is your play ### Select STOXX Europe Aerospace & Defense ETF (EUAD) - **YTD Return: +78.0%** - **Why it's soaring**: Europe is finally getting serious about defending itself - **The catalyst**: EU targeting €800 billion in defense investments by 2030 - **Insight**: Germany alone is committing over $100 billion annually ### Invesco Aerospace & Defense ETF (PPA) - **YTD Return: +61.7%** - **Assets: $6.2 billion** - **Insight**: Nearly 20 years of track record, balanced exposure - **The play**: Blue-chip defense contractors with proven execution [![](https://storage.ghost.io/c/24/9d/249db85d-ffc7-4113-b57b-0505d666fa1d/content/images/2026/07/6b90ba25-ce1b-42cc-b5af-2c0758ad40ac_2400x1600.png)](https://etfalert.substack.com/) Defense ETF Performance: YTD Returns Comparison (January - September 2025) #### Themes Transatlantic Defense ETF (NATO) - **YTD Return: +44.2%** (launched October 2024) - **The angle**: Direct exposure to NATO burden-sharing - **Why it matters**: As the US pulls back, allies must step up - **Risk factor**: Newer fund, smaller size #### SPDR S&P Aerospace & Defense ETF (XAR) - **YTD Return: +42.9%** - **The difference**: Equal-weight methodology reduces concentration risk - **Why it matters**: Mid-cap component manufacturers benefiting from both defense and commercial aviation #### iShares US Aerospace & Defense ETF (ITA) - **YTD Return: +37.6%** - **Assets: $9.4 billion** (largest in the sector) - **Holdings**: GE Aerospace, RTX, Boeing - **Why it works**: Liquid, established, institutional favorite #### SPDR S&P Kensho Future Security ETF (FITE) - **YTD Return: +34.5%** - **Focus**: Cybersecurity, drones, space systems, AI-enabled platforms - **The Pentagon angle**: $1.8 billion AI budget (up 63.6%) - **For investors who** want exposure to the future of warfare [![](https://storage.ghost.io/c/24/9d/249db85d-ffc7-4113-b57b-0505d666fa1d/content/images/2026/07/27c7d162-9e46-4b18-bdb1-3ead8bb5f117_2400x1600.png)](https://etfalert.substack.com/) Defense ETFs Performance Analysis: YTD Returns vs Assets Under Management (2024-2025) --- ## Geopolitical Catalysts Multiple global tensions are driving massive defense spending increases. **NATO's Big Commitment**: Allied nations must hit 5% of GDP on defense by 2035—that's $4.2 trillion annually and nearly triple current European spending levels. **Asia-Pacific Arms Race**: Taiwan boosted defense spending 23% to $31.3 billion as China ramps up military pressure. Other regional countries are following with major increases. **Europe Goes Independent**: EU nations want less reliance on U.S. protection, driving 6.8% annual defense budget growth through 2035—the fastest since WWII. **Middle East Buildup**: Gulf states are spending $100+ billion yearly on missile defense and advanced weapons due to regional instability. All these factors together create a perfect storm of demand that defense contractors can count on for years to come. --- ## Investment Strategy **For Maximum Growth**: SHLD and EUAD offer the highest potential. These are for investors who believe the defense tech revolution is just getting started. **For Stability**: ITA and PPA provide exposure to established contractors with decades of government relationships. **For Diversification**: XAR's equal-weight approach captures mid-cap outperformance while NATO provides pure transatlantic exposure. **For the Future**: FITE offers differentiated exposure to cybersecurity and emerging threats. This is where defense spending is heading. --- ## Risk Factors Let's be honest, nothing goes straight up forever. **Valuation Concerns**: Some names are trading at premium multiples. RTX is at 44.4x trailing P/E, well above historical norms. **Political Risk**: Election cycles can shift priorities, though national security typically transcends party lines. **Supply Chain Constraints**: The same chip shortages are affecting missile systems. This limits how fast contractors can scale production. **Technological Disruption**: Today's cutting-edge weapon could be tomorrow's museum piece if warfare evolves faster than expected. --- ## Don’t Miss This Opportunity The defense supercycle isn't speculation; it's happening right now. With global tensions rising, new military tech emerging, and governments pledging massive budget increases, defense stocks could be the most reliable bet for the next ten years. - **Want big gains?** SHLD and EUAD have the highest upside, but expect wild price swings - **Playing it safe?** Stick with ITA and PPA—these funds hold rock-solid defense giants with decades of steady profits - **Looking for something different?** Try XAR for balanced exposure or NATO for companies on both sides of the Atlantic **Remember**: This analysis is for educational purposes and shouldn't be considered personalized investment advice. Defense stocks can be volatile, and past performance doesn't guarantee future results. Always consult with a financial advisor before making investment decisions, especially in sector-specific ETFs. --- Thanks for reading ETF Alert! This post is public so feel free to share it.