Trump's Record Defense Budget Is Reshaping the Pentagon: 3 Stocks That Will Benefit

The Trump administration's proposed 2027 defense budget marks a step change in U.S. spending. It calls for $1.5 trillion in spending compared to around $1 trillion in 2026, a massive leap that will be applied to systems found everywhere from outer space to under the ocean. The Trump administration would like to increase spending on industrial sectors such as shipbuilding, as well as on advanced technologies such as satellite surveillance and missile-detection systems.

Here are three stocks set to benefit from this defense spending resurgence (if it is approved), along with whether they are buys for your portfolio today.

Image source: Getty Images.

General Dynamics: A force in shipbuilding

One urgent area highlighted for modernization in defense contracts is shipbuilding, and General Dynamics (NYSE: GD) is the leader in this field. Its marine systems segment generated $16.7 billion in revenue last year, up 16.6% year over year. With the United States falling behind China in shipbuilding capacity, there is a push to increase domestic manufacturing capacity, which should lead to greater spending by General Dynamics on submarines, destroyers, and support ships.

This growing demand was visible last year, when General Dynamics had a book-to-bill ratio of 1.5 and ended the year with a $118 billion backlog. The book-to-bill ratio measures how many new contracts a company has booked versus how much it has earned on existing business; a number above 1 indicates that contract value is growing faster than the company can complete existing deals.

This is a good thing for General Dynamics. Along with its other business segments, such as its private aviation jets (it owns Gulfstream), the company should see strong growth in the years ahead. At a price-to-earnings ratio (P/E) of 21 and a price-to-sales ratio (P/S) of 1.7, General Dynamics should be a solid winner in the defense sector for the next decade.

Palantir Technologies: The data layer for defense

The hottest defense stock with the largest market cap in the sector is Palantir Technologies (NASDAQ: PLTR). It sells artificial intelligence (AI) analytical solutions to large organizations, including the U.S. military, a major customer. The company has projects within varying arenas, including intelligence services and analysis for boots-on-the-ground combat. For example, the company just signed a 2025 deal with the U.S. Army that could be worth $10 billion over 10 years.

With the defense budget focused on software modernization and AI, Palantir is set to benefit from this segment in the years ahead, further entrenching itself as the data layer connecting the Defense Department.

Revenue grew 70% year over year last quarter to $1.4 billion. Its large and growing backlog should lead to even more revenue growth in 2026 and beyond. However, Palantir stock currently trades at an absurd valuation, with a P/S ratio of 81.6, making it prohibitively expensive for any investor to buy today.

BlackSky Technologies: Intelligence from orbit

An area of increased investment from the United States military is orbital satellite surveillance, which means regular imaging of hot spots around the globe to inform decision-making by military leaders.

BlackSky Technologies (NYSE: BKSY) is a leader in defense imaging services, with a constellation of satellites that capture regular, high-resolution images of requested areas throughout the day. Now, it is upgrading its services to deliver even higher-resolution pictures and to apply AI to parse all the data to help speed up military decision-making.

The company generated $107 million in revenue last year, which is up significantly from five years ago when the stock went public, but has been stagnant for the last two years or so. However, in 2026, management expects new contracts to drive revenue of $120 million to $145 million.

At scale, BlackSky should have strong profit margins because it can use the same constellation of satellites for as many customers as it wants. However, the addressable market for intelligence imaging is limited outside the United States military and its allies. Commercial customers do not necessarily need to monitor a port every 90 minutes, for example.

At a P/S ratio of 11.5, BlackSky Technologies does not trade at an absurd valuation like Palantir, given its growth potential and small starting size. Investors just need to consider a potentially limited addressable market before loading up on this defense disruptor, even if U.S. military spending increases in the years ahead.

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends BlackSky Technology and Palantir Technologies. The Motley Fool has a disclosure policy.