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Russia's invasion of Ukraine sparked a defense boom. It's likely to outlast the war

·1 min

Western defense companies have seen a surge in stock prices since Russia’s invasion of Ukraine two years ago. The industry is expected to continue booming despite uncertainty surrounding further US military aid for Kyiv. Governments have been providing weapons and increasing defense budgets, with NATO members spending 11% more on defense in 2023 compared to the previous year. Rising defense budgets mean that there will be more work for private defense contractors. Companies like Saab and BAE Systems have reported significant profits and are anticipating long-term growth. The US military support for Ukraine is unlikely to continue at the same scale as before, leading European governments to seek alternative solutions. The pressure on Western governments to increase defense spending is expected to last beyond the Ukraine war. Global defense spending reached a record $2.2 trillion in 2023, driven by concerns over China’s rise and Russia’s engagements in Europe. The febrile global environment has also benefited smaller defense contractors, with shares of Renk, a German manufacturer of military tank gearboxes, experiencing a significant increase. The competition among great powers is driving defense spending, with a focus on countering China and Russia.