The fiscal 2027 National Defense Authorization Act proposes an increase in annual U.S. military spending to $1.15 trillion. However, the Russia-Ukraine war, ongoing Middle East conflicts involving Israel, Iran and Hamas, and tensions between the U.S. and China regarding Taiwan may compel global governments to increase defense industry spending. At the same time, these geopolitical pressures could provide significant tailwinds for defense sector earnings.
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Defense stocks remain highly attractive for investors seeking stability, as these companies typically have predictable, multiyear government contracts. Morgan Stanley analysts have identified these seven top-tier defense stocks to buy in 2026:
| Stock | Implied upside* |
| GE Aerospace (ticker: ) | 10% |
| RTX Corp. () | 1% |
| Howmet Aerospace Inc. () | 10% |
| General Dynamics Corp. () | 11% |
| Northrop Grumman Corp. () | 36% |
| Axon Enterprise Inc. () | 10% |
| Rocket Lab Corp. () | 64% |
*Using Morgan Stanley price targets and July 28 closing prices.
GE Aerospace ()
GE Aerospace supplies jet engines and services around the world and currently has an installed base of roughly 30,000 military and 50,000 commercial aircraft engines. The company’s defense and propulsion technologies business designs, produces and services jet engines and associated electrical systems and components for governments, commercial airframers and militaries. Analyst Kristine Liwag says the combination of an aging fleet of existing aircraft, the company’s large and growing installed engine base and GE’s increasingly efficient engine services business suggests GE will generate strong growth numbers ahead. Morgan Stanley has an “overweight” rating and $400 price target for GE stock, which closed at $363.59 on July 28.
RTX Corp. ()
RTX is the defense behemoth created by the 2020 merger of Raytheon and United Technologies. The company’s Collins and Pratt & Whitney subsidiaries are more focused on the commercial aerospace industry, but its Raytheon subsidiary develops advanced sensors and provides training, software and cybersecurity solutions for the U.S. intelligence community and the Department of Defense. Liwag says RTX exceeded consensus analyst estimates for earnings, revenue, net income, operating cash flow and operating margin in the second quarter of 2026, and the market will likely reward investors accordingly. Morgan Stanley has an “overweight” rating and $220 price target for RTX stock, which closed at $218.58 on July 28.
Howmet Aerospace Inc. ()
Howmet Aerospace manufactures lightweight metal products, specializing in jet engine components, titanium structural parts, aerospace fastening systems and forged wheels. The company also provides defense solutions to its military partners, such as precision machining, integrated program management and metals expertise. Liwag says end-market conditions across Howmet’s defense, commercial aerospace and gas turbines businesses remain very strong, and Howmet will likely continue to outgrow its industry peers and further expand its margins. She says Howmet has significant pricing power, reliable execution and strong competitive positioning. Morgan Stanley has an “overweight” rating and $315 price target for HWM stock, which closed at $286.04 on July 28.
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General Dynamics Corp. ()
General Dynamics is a diversified aerospace and defense company that produces a wide range of products, including Gulfstream jets, Abrams tanks and . The majority of the company’s revenue comes from the U.S. government, particularly its large contracts with the Department of Defense. Liwag says global business jet demand has been resilient, and General Dynamics will be one of the biggest winners from accelerating defense industry spending. She says the ‘s focus on the U.S. shipbuilding industry is a particularly bullish tailwind. Morgan Stanley has an “overweight” rating and $435 price target for GD stock, which closed at $393.19 on July 28.
Northrop Grumman Corp. ()
Northrop Grumman is one of the world’s largest weapons and military technology producers. The company’s defense systems segment provides battle management and missile systems products and services, while its mission systems segment focuses on airborne sensors and networks, as well as other military and intelligence mission solutions. Liwag says Northrop Grumman has cultivated a portfolio of products and services that are highly aligned with the Department of Defense’s investment priorities, such as classified space missions, nuclear modernization, missiles and munitions. Liwag also sees international business growth opportunities. Morgan Stanley has an “overweight” rating and $745 price target for NOC stock, which closed at $549.22 on July 28.
Axon Enterprise Inc. ()
Axon Enterprise is a law enforcement hardware and technology solutions provider. In addition to supplying body-worn cameras and virtual reality training to law enforcement, Axon’s military products include military body-worn cameras, drone technology, in-vehicle camera systems and digital management platforms. Analyst Meta Marshall says Axon is gaining traction with its tools, especially its Draft One generative AI platform for law enforcement. Marshall is also optimistic about the outlook for Axon’s Drone as First Responder program that is still in the early stages of standardization. Morgan Stanley has an “overweight” rating and $600 price target for AXON stock, which closed at $547.65 on July 28.
Rocket Lab Corp. ()
Rocket Lab is an aerospace and defense company that specializes in launch services, spacecraft engineering and design, components manufacturing and other spacecraft management solutions. Rocket Lab’s defense business includes providing tactically responsive satellite manufacturing and specialized launch services for the U.S. Space Force’s Space Development Agency. Liwag says Rocket Lab is much smaller than SpaceX, but its Electron space launch offering is reliable and is the second-most used U.S. launch service. She is also bullish on Rocket Lab’s recent acquisition of Iridium’s operational satellite constellation. Morgan Stanley has an “overweight” rating and $105 price target for RKLB stock, which closed at $63.89 on July 28.
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Update 07/29/26: This story was published at an earlier date and has been updated with new information.
