U.S. defense budget expansion exceeds one trillion dollars, sparking a boom in defense stocks: Yuanta Global Aerospace and Defense Technology ETF has risen nearly 25% this year.

The U.S. defense budget has surpassed $1 trillion for the first time, approved on May 22, 2025, with an increase of approximately $150 billion, prompting a swift reaction in global markets. Taiwan's Yuanta Global Aerospace & Defense Technology ETF (00965) was affected, with its stock price reaching a new high of 17.85 USD on May 23, representing a nearly 25% increase since the start of the year. The ETF's holdings primarily consist of major U.S. and European defense contractors, directly benefiting from the budget expansion. Capital flows show active positioning by institutional investors, and international asset management firms have also launched defense-themed ETFs, indicating a growing interest in investing in the defense sector.

U.S. Defense Budget Surpasses One Trillion Dollars, Market Reacts Swiftly

On May 22, 2025, the U.S. government officially passed a proposal to increase the defense budget to one trillion dollars, an increase of approximately 150 billion dollars from the previous year, with 1130 billion dollars directly injected into the Pentagon. This marks the first time in U.S. history that defense spending has surpassed the trillion-dollar mark, highlighting its emphasis on military modernization, space defense, and arms exports.

As soon as the news broke, global markets reacted swiftly, with stocks and ETFs related to the defense industry showing significant gains. Corporations pointed out that this budget expansion is not only a short-term stimulus but could also become a turning point for long-term capital allocation, attracting institutional investors to reassess the growth potential of the defense industry.

Yuanta Global Aerospace & Defense Technology ETF (00965) Stock Price Soars

As Taiwan's only ETF focused on global aerospace and defense technology, the Yuanta Global Aerospace & Defense Technology ETF (00965) became one of the biggest beneficiaries of this market trend. According to the Taiwan Stock Exchange, the ETF closed at 17.85 New Taiwan dollars on May 23, up 1.42% in a single day, setting a new high since its listing. This year, 00965 has reached new historical highs 15 times, with a cumulative increase of over 20%, approaching 25%, far outperforming gold ETFs during the same period.

Analysts noted that the impressive performance of 00965 is due to its constituent stocks, which are mostly major U.S. and European defense contractors, directly benefiting from the U.S. defense budget expansion and the intensifying global arms race. Meanwhile, the ETF's trading volume also significantly increased, with a single-day trading volume of 7,993 units on May 23, indicating active capital inflow.

Strong Performance of Constituent Stocks, Defense Giants Clearly Benefiting

The constituent stocks of 00965 include several leading global aerospace and defense companies, such as RTX (Raytheon Technologies Company), L3Harris Technologies, Lockheed Martin, Northrop Grumman, and Palantir. These companies have generally seen their stock prices rise following the increase in the U.S. defense budget.

According to U.S. financial media reports, RTX and L3Harris are expected to directly benefit from the U.S. policy to strengthen space defense due to their leading positions in space systems and missile warning technology. RTX's revenue in the first quarter of 2025 increased by 8% year-on-year, with double-digit growth in its commercial aerospace maintenance business, demonstrating its diversified revenue structure's resilience.

Additionally, Palantir, due to its technological advantages in AI military applications and data analysis, is seen by the market as a potential core supplier for the U.S. "Golden Dome" missile defense program. Wedbush analysts estimate that the program's total amount could reach 175 billion dollars, with 25 billion dollars to be invested in 2026, making Palantir a likely major beneficiary.

Capital Flows Indicate Active Institutional Positioning

In addition to impressive stock performance, capital flows also show the market's high attention to the defense industry. According to market statistics, 00965 has recently been continuously bought by self-operated traders and foreign investors, with self-operated traders investing 3.45 billion New Taiwan dollars in just nine trading days, indicating their high confidence in the ETF.

Analysts pointed out that as technology stocks face pressure from trade tariffs and policy uncertainties, defense ETFs with growth potential and policy support have become the new favorites for asset allocation. Especially under U.S. President Trump's promotion of "reciprocal trade" and arms export policies, the revenue visibility and order stability of the defense industry chain are more attractive.

International Asset Management Firms Enter Defense ETF Market

Seeing the long-term potential of the defense industry, international asset management giants like BlackRock and Amundi have recently announced the launch of defense-focused ETFs, further expanding market options. This indicates that the investment enthusiasm for the defense industry in global capital markets is continuing to rise.

In this context, the Yuanta Global Aerospace & Defense Technology ETF, being a pioneer in the Taiwanese market, enjoys a first-mover advantage and market recognition, with future capital momentum expected to continue.

U.S. defense budget expansion exceeds one trillion dollars, sparking a boom in defense stocks: Yuanta Global Aerospace and Defense Technology ETF has risen nearly 25% this year.

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