Defense Is the Story of 2026. Here Are 2 Stocks to Own All Year.

While hostilities with Iran seem to be cooling -- for the time being -- most people will agree that it's only a matter of time before the next military conflict occurs. For investors, this has raised questions about America's military preparedness and which defense contractors are supporting the United States in its efforts to maintain military superiority.

But with so many companies to consider, investors may feel overwhelmed. Fortunately, two stocks stand out as prime opportunities right now.

Image source: Getty Images.

An up-and-comer among defense contractors

While Rocket Lab (NASDAQ: RKLB) commands serious respect for its extensive operations in civilian applications of the space economy, its familiarity among investors committed to defense industry exposure is surely lacking. But that may soon change.

Rocket Lab is attracting increasing attention from the U.S. government as a launch services provider. In addition to HASTE, a modification of the company's Electron rocket that provides the Department of Defense with hypersonic capabilities, Rocket Lab will soon offer the medium-lift Neutron rocket, which can deploy constellations of satellites and support other national security missions.

In March, for example, Rocket Lab announced the signing of its single-largest launch agreement: a $190 million contract for a block buy of 20 hypersonic test flights with the HASTE launch vehicle for a program that the Department of Defense and Naval Surface Warfare Center Crane Division are partnering on to accelerate hypersonic flight tests.

More recently, the company received a $90 million contract from the U.S. Space Force's Space Systems Command to develop two geostationary satellites to broaden space domain awareness for the U.S. It's the first satellite production award for geostationary orbit, and it demonstrates the company's expanding role as a defense contractor.

For defense industry investors on the prowl for growth opportunities, Rocket Lab stock demands attention.

If defense is the story of 2026, drones are a major plot point

Today's battlefields are starkly different from those of years past. Nowadays, military leaders have embraced drones as one of the leading options to gain strategic advantages. Of the many drone stocks to consider, AeroVironment (NASDAQ: AVAV) is a compelling option.

Unlike many other defense contractors, AeroVironment is a pure-play drone company, and its offerings aren't limited to the wild blue yonder. The company also provides autonomous vehicles that operate on land, at sea, and in space -- as well as cyber capabilities.

One unique opportunity for AeroVironment right now is Golden Dome, a multibillion-dollar initiative to develop an integrated air and missile defense system to safeguard the United States. From its BADGER digital phased array solution that supports communications to PANTHER, which supports autonomous operations with electronic scanning, to the LOCUST laser weapon system, AeroVironment has numerous capabilities that the Department of Defense could select in support of Golden Dome.

The company is aggressively expanding its production facilities to support growing demand for its solutions. Earlier this month, it announced a $15 million expansion of its Ohio production facility, adding to the $30 million expansion of its New Mexico facility and the $20 million expansion of a facility in Alabama.

With $1.1 billion in funded backlog and another $3 billion in unfunded backlog, AeroVironment clearly offers defense solutions that are in high demand right now.

Which defense stock is right for you?

For growth investors seeking exposure to defense stocks, Rocket Lab and AeroVironment are two great options right now. Since Rocket Lab is still unprofitable, though, those with lower risk tolerances may prefer AeroVironment stock at this time, as the company is profitable on an adjusted earnings-per-share (EPS) basis. In 2026, for example, AeroVironment forecasts adjusted EPS between $2.75 and $3.10.

Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AeroVironment and Rocket Lab. The Motley Fool has a disclosure policy.