2 Defense Stocks to Buy as Global Military Spending Climbs

Not-so-fun (but interesting) fact: The U.S. spends more on servicing its debt (about 15% of the overall budget) than on defense (about 13%), and it's been that way since 2024. Even if it isn't the biggest line item on the overall U.S. budget, this country allocates a mammoth amount of money to military and national security spending.

Earlier this year, the White House unveiled its fiscal 2027 defense budget request, and it totaled a staggering $1.5 trillion, a 42% increase over 2026. That's just a single year's budget request. Clearly, this country spends big on defense.

Global governments are accelerating defense spending. Image source: Getty Images.

And the United States isn't the only country spending more on defense. Other countries are boosting defense expenditures significantly in response to the ongoing conflicts in Iran and Ukraine, out of a desire to be proactive, to spur economic activity, or for other reasons. Global defense spending reached a jaw-dropping $2.9 trillion last year, accounting for roughly 2.5% of the world's economic output.

When category spending approaches $3 trillion annually, there is a range of investment implications to consider. Some of the more compelling defense spending investment opportunities arrive courtesy of the largest industrial companies by market cap, including Honeywell Aerospace (NASDAQ: HONA) and RTX (NYSE: RTX).

A big backlog and more

RTX is getting so many business requests that it now has a sizable backlog of $289 billion, and, even more impressively, it could surge to $460 billion by the end of 2028. Clearly, RTX has become a preferred defense vendor for various governments, including the U.S.

RTX is also positioned as a prime beneficiary of an expected U.S. military replenishment cycle. While accounts vary, the U.S. has used up a significant amount of its ordinance in the war in Iran. For example, it now has a dwindling supply of the critical Tomahawk missile, produced by RTX. To help manage supply, the U.S. indefinitely halted shipments of Tomahawk missiles to Japan back in May. And this summer, the U.S. spent nearly $23 billion to entice RTX to accelerate Tomahawk production.

Being in demand by the U.S. government is an enviable position for securing defense contracts and supports the long-term RTX investment thesis. But RTX is also in demand by other governments. The aforementioned Japan is ramping up military spending and could soon raise it to 3.5% of the country's GDP (up from 2% in 2025).

RTX also counts several European Union members among its customers, including Poland. Likely out of concerns about Russian aggression, Poland's defense budget is soaring. This year, it'll reach 4.8% of GDP (up from 4.5% in 2025), indicating RTX is in a lot of the right places at the right time.

Honing in on Honeywell Aerospace

As a stand-alone public company, Honeywell Aerospace is new to the scene, having recently been spun off from Honeywell Technologies (NASDAQ: HON). The aerospace stock has struggled since that separation, trading 45.1% below its 52-week high on Sept. 23, but that may be opening the door to a value opportunity in the company that makes multiple navigation products for various air, land, and sea vehicles, the turbofan engines for military trainers and combat jets, as well as the gas turbine engines for M1 Abrams tanks.

Honeywell Aerospace also manufactures power systems, sensors, and sophisticated communications gear for military use, which is purchased exclusively by governments, indicating the company is tethered to rising defense budgets.

The company hopes to grab a larger slice of the defense spending pie, allocating $500 million to enhance its domestic facilities to attract more business from the Department of Defense.

Yes, it's hard to cozy up to a stock that's in a bear market. But some risk-tolerant, long-term investors may be rewarded by Honeywell Aerospace, as some experts believe it will eventually pay a dividend, living up to the company's commitment to return capital to shareholders.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Honeywell Aerospace, Honeywell Technologies, and RTX. The Motley Fool has a disclosure policy.