Riding the Wave: Defense ETFs to Watch After the US-UK Tech Pact

Core Insights - The U.S.-UK Technology Prosperity Deal (TPD) is expected to significantly boost defense exchange-traded funds (ETFs) due to collaboration on defense capabilities, with over $350 billion in combined investments from both sectors [1][6] - AI-driven defense companies are gaining traction as modern warfare increasingly relies on information and speed, allowing militaries to make rapid, data-informed decisions [2][3] - The TPD includes a commitment from the UK to purchase over $80 billion in goods from U.S. tech and defense companies over the next five years, benefiting companies like Palantir [5] Defense ETFs Overview - The TPD aims to enhance the U.S.-U.K. special relationship in technology, directly impacting defense ETFs that focus on AI-driven defense companies such as Palantir, L3Harris Technologies, and Lockheed Martin [4][6] - Select STOXX Europe Aerospace & Defense ETF (EUAD) has gained 85.4% year to date, focusing on European defense companies, including BAE Systems [7][8] - Global X Defense Tech ETF (SHLD) has increased by 78% year to date, with major holdings in Palantir, RTX Corp., and Lockheed Martin, all engaged in AI-focused defense technologies [8][9] - SPDR S&P Aerospace & Defense ETF (XAR) has risen by 36.8% year to date, including companies like Kratos Defense & Security Solutions and Rocket Lab, which are involved in AI-based defense technology [9][10] - iShares U.S. Aerospace & Defense ETF (ITA) has gained 39.9% year to date, with significant holdings in GE Aerospace and Boeing, both innovating in AI-driven defense technology [10][11] - Invesco Aerospace & Defense ETF (PPA) has increased by 32% year to date, focusing on U.S. defense and aerospace operations, with major holdings in Boeing and Lockheed Martin [11]