The U.S. Department of Defense (DoD) is poised to significantly ramp up its investment in defense technology, with a projected $384 billion allocation for defense system procurement and research and development in 2026. This represents a 71% increase compared to 2020, underscoring the urgent need for advanced military capabilities in an increasingly complex global security landscape.
The surge in defense spending is part of a broader strategy to modernize all branches of the U.S. military and foster innovation in critical defense technologies. The DoD’s budget request for fiscal year 2026 highlights several key areas of investment, with Missile Defense Programs seeing the most substantial increase—an impressive 247% jump from 2020 levels. This surge in funding reflects the growing importance of missile defense in deterring emerging threats.
“Missile Defense Programs will see the largest spending increase in 2026 (+247%), while Ground Systems will see the only decrease (-21%), compared with 2020 numbers,” according to the latest analysis by Visual Capitalist in partnership with Global X ETFs.
In contrast, Ground Systems is the only sector expected to experience a reduction in funding, with a 21% decrease from $14.6 billion in 2020 to $11.6 billion in 2026. This shift suggests a strategic reallocation of resources towards more advanced and agile defense systems.
The DoD’s spending priorities for 2026 include:
– Aviation and Related Systems: $68.3 billion
– Command, Control, Communications, Computers, and Intelligence (C4I) Systems: $23.2 billion
– Ground Systems: $11.6 billion
– Missile Defense Programs: $40.2 billion
– Missiles and Munitions: $35.7 billion
– Shipbuilding and Maritime Systems: $65.0 billion
– Space-Based Systems: $34.0 billion
The total requested budget for these programs in 2026 is $278.0 billion, a stark contrast to the $162.3 billion allocated in 2020.
The push for advanced defense technology is not unique to the U.S. Globally, defense spending has surged to $2.5 trillion in 2024, driven by geopolitical tensions and the rapid evolution of military technology. This trend presents a unique opportunity for investors, as defense technology offers a strong diversification play, often insulated from standard economic cycles.
The Global X Defense Technology ETF (SHLD) provides investors with exposure to companies at the forefront of defense technology, including those specializing in robotics, aircraft, artificial intelligence, and big data systems. This ETF reflects the growing recognition of defense technology as a critical sector for both national security and investment portfolios.
As the U.S. and its allies continue to invest heavily in defense technology, the landscape of global security is set to evolve rapidly. The DoD’s 2026 budget request signals a strategic shift towards advanced, high-tech defense systems, ensuring that the U.S. military remains at the cutting edge of innovation and preparedness. For investors, this represents not only a chance to support national defense but also to capitalize on the burgeoning defense technology sector.