Defensive posture

Focus on the defense industry has sharpened, driven by rising geopolitical tensions and in the wake of Russia’s invasion of Ukraine and the armed conflict between Israel and Hamas in Gaza. In recent decades global defense spending has grown modestly at a 2.2% compound annual growth rate (CAGR) and just 1.1% in the US. Meanwhile in China, Iran and Russia combined, spending has grown at a 6% CAGR. Although there has been heightened pressure on European countries to increase their defense spending, 22 of the 29 European NATO member countries are already on track to reach or exceed the 2% of GDP target, according to Bernstein research. However, as Ukraine demonstrated with cyber weapons and drones, technology can often provide effective results at a lower cost. Notably, over the last five years, venture investment into defense technology firms has risen more than fourfold.

Source: SIPRI, Bernstein, October 2024