The Old Defense Playbook Is Broken
For the last decade, if you wanted to invest in defense, the playbook was simple: go high-tech.
These were the sexy picks - the ones making headlines at investor conferences and showing up in every "future of war" article.
The companies making actual bullets, missiles, and bombs? They were seen as old-school. Low-margin. Not exactly the kind of thing you'd brag about at brunch.
But 2026 is changing that story fast.
The U.S. military conducted operations in and around Venezuela through late 2025 and into early 2026, culminating in a major operation on January 3rd.
The mission was quick - The amount of missiles and ammunition used in just a few weeks exceeded three years of normal production.
Plus, the U.S. began strikes against Iran in February 2026. This means more bullets, missiles, and bombs need to be created to replenish supply
Replishing supply = more dollars. And the U.S. military does not make most of its own defense equipment or ammunition.
It hires companies or contractors to do that for them - which means the U.S. military's nearly $1 trillion 2026 budget goes to individual companies.
Investors can benefit from these companies as defense spending increases and globally instability rises.
And with activity from our military crisis, it needs more of the “boring” things investors have overlooked for years: Ammo, missiles, bombs, and more.
Let’s break down how this is creating several potential long term opportunities for investors, which stocks are benefiting, and the risks investors should keep in mind.
This is just one of many different market shifts going on right now.
But there are several other happenings right now - all of which investors could be profiting from.
Our Head of Investment Research joined our CEO Jaspreet Singh to breakdown how we spot market shifts and potential investment opportunities.
Watch or listen to the free podcast where they break it all down right now.
The Government Shift Nobody Saw Coming
Here's what's happening on the ground:
The Department of Defense is now authorizing multi-year contracts for traditional ballistics companies to rebuild depleted stockpiles.
We're talking guaranteed revenue streams that could run 5 to 7 years into the future.
The funding isn't flowing toward the next shiny AI weapon system.
It's flowing toward the companies that can manufacture real things at massive scale - missiles, artillery shells, precision rockets - fast.
This is a shift from "Innovation" spending to "Replenishment" spending.
And for investors who understand this distinction, it changes which companies are worth watching.
It's Not Just the Pentagon Ordering
Here's another layer most investors are missing.
The Venezuela operation didn't just drain U.S. stockpiles. It put on a live demonstration of how effective American weapons systems are - and allied nations around the world were watching.
Eastern European countries, pacific partners, NATO allies and all want the same proven systems. And they're not just window shopping - they're getting in line.
Orders are now coming from multiple directions at once: the Pentagon is replenishing what it spent, while foreign governments are trying to secure their spot in the production queue before it fills up.
This kind of dual demand - domestic replenishment plus foreign military sales - is rare.
And it's exactly the kind of environment that can sustain a company's revenue for years, not quarters.
The Companies That Stand to Benefit
So who makes all of this stuff?
Industrial giants with real factories, decades of government contracts, and products that have just been proven in live combat.
Let's look at two worth putting on your radar.
RTX Corporation (RTX) - Missiles
RTX, formerly known as Raytheon, is the premier missile maker in the world.
Their flagship product? The Patriot missile system — used to shoot down enemy missiles and aircraft before they do damage. There's currently no equivalent for sale anywhere else in the world.
The company has a backlog of orders at record highs. Unlike airplane orders, which can be cancelled, munitions orders are essentially guaranteed. That's a different kind of revenue.
General Dynamics (GD) - Artillery
Most people know General Dynamics for making Gulfstream private jets.
But hidden inside the company is one of the most strategically important divisions in American defense: Combat Systems.
GD operates the U.S. Army's main ammunition plants — including the historic Scranton facility. They make the MK-80 series bomb bodies, which were heavily used by the Air Force during the Venezuela operations.
The Department of Defense recently authorized a "Surge Capacity" contract to ramp artillery production from 40,000 rounds per month to 100,000 rounds in 2025.
That's a World War II-level production push - applied to a 2026 supply chain.
Why This Shift Has Legs
Let's be clear about something: this isn't a short-term trade.
Even if global tensions cooled tomorrow, stockpiles have been used up.
They need to be replaced. That process takes years. Factories can't flip a switch - they need time, capital, workers, and raw materials to scale up.
And this demand isn't happening in isolation.
The U.S. military's success in Venezuela didn't just deplete stockpiles - it proved that American weapons work.
That proof is now being priced into foreign military sales pipelines that will run for years.
The companies positioned to benefit aren't taking a risk on a new product.
They're filling orders for proven systems with guaranteed government contracts.
That's a different kind of investment thesis than betting on a new technology.
What Are the Risks?
Here are the two risks investors will want to keep in mind:
Supply chain bottlenecks. The engines that power missiles - called Solid Rocket Motors (SRMs) - are made by only two suppliers in the U.S.
If those suppliers can't scale up production fast enough, even the biggest munitions companies can't ship their orders.
That's a chokepoint that could limit growth even with massive demand.
A calmer geopolitical world. If major conflicts don't materialize and military spending slows, some of this demand could ease.
That said, global stockpiles have already been depleted.
Even in a peaceful environment, militaries still need to replace what they've spent - so the floor on demand is higher than it looks.
The Big Picture
Defense investing has changed.
For years, the story was about innovation: drones, AI, cyber.
That's still happening - but it's no longer the only story.
The new story is replenishment. The U.S. military burned through weapons faster than the system could replace them.
The government is now writing long-term contracts to fix that.
And the companies best positioned to win those contracts are the ones with the factories, the designs, and the track records to deliver at scale.
These aren't speculative bets - they're industrial companies with real backlogs, real contracts, and products that have just been proven in the field.
The "Replenishment Supercycle" - as our analysts are calling it - is just getting started.
What These Defense Stocks Mean For Investors
If you're a retail investor watching this space, the key question isn't just which defense stocks to buy - it's why this moment is different from past defense cycles.
The answer is the shift from innovation spending to replenishment spending.
But here’s the thing - there are more potential opportunities in this shift. We cover them all and more in Market Briefs Pro.
To find out more about how we discover new shifts in the market and find opportunities, watch this free podcast with our Head of Investment Research.
