Billy Leung
Australia’s richest person, Gina Rinehart, has bought into some of the world’s largest defence companies. It may seem an unusual move for a mining billionaire, but it reflects a broader shift in markets.
Defence has gone from a geopolitical matter to a global investment theme, driven by government spending, technological advances and greater uncertainty in global security.
As conflicts persist in Europe and the Middle East and tensions remain elevated in Asia, governments are dramatically increasing military expenditure. According to the Stockholm International Peace Research Institute (SIPRI), global military spending reached a peak $US2.9 trillion in 2025, marking the 11th consecutive year of growth.
Europe has become a key driver. The continent’s military spending surged to record levels last year. NATO members agreed in June 2025 to lift the alliance’s long-term defence spending target from 2 per cent of GDP to 5 per cent by 2035.
Bloomberg reported this month that Rinehart had invested almost $US100 million ($140 million) in US arms companies in the first quarter of this year, a story that drew more readers than the service’s report on the world’s richest man, Elon Musk, and his failed attempt to sue OpenAI’s Sam Altman.
Rinehart’s private company, Hancock Prospecting, disclosed holdings in major US defence contractors including RTX, Northrop Grumman, L3Harris Technologies and Lockheed Martin – an example of growing recognition among investors that defence is evolving into a long-term opportunity rather than a short-term geopolitical trade.
Modern defence spending is no longer focused solely on traditional military hardware.
Defence is unlike many cyclical sectors tied to consumer demand or business confidence. Revenues largely come from sovereign budgets and multi-year procurement contracts, which provide earnings visibility that can hold up even during periods of economic uncertainty.
Recent Global X analysis shows that during periods of major global conflict since 2000, defence stocks in the S&P 500 have outperformed the broader index over the following 12 months.
Past performance is never a guarantee of future returns, but the trend highlights how markets have historically responded to sustained increases in defence spending.
Part of the attraction for investors is that defence spending usually extends beyond immediate conflicts. Governments do not simply increase military budgets during periods of tension and then quickly reverse course. Procurement cycles can cover decades, while replenishing depleted stockpiles can take years.
Importantly, the focus on modern defence spending is no longer solely on conventional military hardware. The nature of warfare is changing.
The conflict in Ukraine has demonstrated how relatively low-cost drones can reshape battlefields and force governments to rethink procurement priorities. Military budgets are increasingly shifting towards autonomous systems, cybersecurity, artificial intelligence, missile defence and counter-drone technologies.
That evolution is creating opportunities not just for longstanding defence contractors, but also for companies involved in advanced software, sensors, robotics and next-generation communications.
This technological shift is one reason that investors more broadly are eyeing defence stocks, not just those previously focused on technology or industrial innovation. Many of the companies benefiting from rising defence expenditure now sit at the intersection of AI, semiconductors, communications infrastructure and aerospace engineering.
Global X estimates that defence spending could exceed $US3.6 trillion by 2030 as countries replenish depleted stockpiles and continue modernising. In the United States alone, defence spending is expected to approach $US1 trillion in fiscal year 2026, driven partly by supplementary funding packages and growing strategic competition with China.
In Australia, programs tied to AUKUS, naval modernisation and advanced missile capabilities point toward sustained defence investment over the coming decade.
Australia’s defence industry is smaller than those of the US or Europe, but it is becoming increasingly connected to global supply chains and technology partnerships.
Billy Leung is a senior investment strategist at Global X ETFs.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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