Wall Street's Defense Playbook Is Changing. Barclays Sees Opportunity in These 6 Stocks
Defense investing isn't just about fighter jets and missiles anymore. Rockets, AI software, and autonomous systems are becoming a bigger part of the business, and Barclays thinks investors should pay attention. The bank just kicked off coverage of US aerospace and defense with a Positive sector rating, putting six stocks on its buy list.
Barclays has 6 stocks on its radar
Analyst Anthony Valentini initiated coverage with Overweight ratings on Boeing, SpaceX, RTX, Rocket Lab, Palantir Technologies, and Kratos Defense & Security Solutions.
Barclays believes the US is in the early stages of an industrial transformation, with companies bringing production back home and defense budgets supporting years of investment.
The bank expects established contractors to remain important, but sees more room for growth among companies developing newer technologies.
"The defense landscape is shifting rapidly toward next-generation tech."
Anthony Valentini, Barclays
SpaceX and Rocket Lab could take off
SpaceX landed the biggest projected gain, with Barclays setting a $254 price target that implies 58% upside.
Valentini sees SpaceX's launch capabilities as a major advantage, with Starship potentially widening its lead through heavier payloads and more frequent launches. That could also support Starlink's satellite network and future opportunities in orbital AI data centers.
Rocket Lab wasn't far behind. Barclays assigned an $85 target, suggesting 24% upside, as the company expands beyond its Electron rocket into larger launches with Neutron.
The appeal goes beyond sending rockets into orbit. Rocket Lab is building a broader space business, giving it more ways to benefit as demand for launches and satellite infrastructure grows.
AI is becoming a defense business
Palantir received an Overweight rating and a $265 price target, with Barclays highlighting its role in bringing AI and data analytics into military operations.
Its software helps organizations combine information and make decisions at scale, capabilities that are becoming increasingly important as defense systems grow more sophisticated.
Kratos also made the cut, giving Barclays exposure to emerging defense technology alongside the traditional contractors.
Boeing and RTX represent the established side of the industry. Barclays also sees opportunities in commercial aerospace maintenance and replacement parts, businesses that can keep generating revenue long after aircraft are delivered.
The opportunity comes with a catch
Barclays is making a case for where defense spending could go, not guaranteeing which stocks will deliver. Its price targets reflect the bank's expectations, and several picks carry risks that established contractors don't face.
Rocket Lab, for instance, still needs to bring Neutron into routine service. Meanwhile, investors buying high-growth defense technology stocks are paying for earnings that may take years to materialize.
The broader Wall Street backdrop was busy, too. Barclays' new coverage arrived alongside analyst upgrades for Humana, Fastly, and Cboe Global Markets.
For investors, the bigger takeaway is how much the definition of a defense stock has changed. Boeing and RTX still have their place, but Barclays is putting rocket launches, AI platforms, and next-generation military technology in the same conversation. The next defense boom may look very different from the last one.
