Andrew King, General Partner at Bastille Capital and President of Future Union, told CNBC on July 10 that the defense trade has decoupled from the traditional playbook. Record Pentagon budgets would ordinarily be expected to lift America’s largest defense contractors. Instead, Lockheed Martin, Northrop Grumman, and other household names have fallen sharply since February, even as military spending reaches new highs.
King argues capital is rotating into private companies and allied international operators that own the fastest-growing pieces of modern warfare. “We got very frothy in the defense market. And there’s other ways to play other than just the public markets. What you’re seeing is a rotation into other public companies,” King said.
Record Defense Spending Is No Longer Lifting the Usual Winners
Lockheed Martin (NYSE:LMT | LMT Price Prediction) has declined 20.34% from its February 20, 2026 close of $650.58 to $518.26.
And Northrop Grumman (NYSE:NOC) has fared even worse, down 25.87% over the same window.
That underperformance sits against a Department of War budget request that keeps climbing. The FY 2027 plan totals $1.45 trillion, up $440.894 billion from FY 2026 enacted levels, with $52.9 billion for Critical Munitions and $59.7 billion in procurement and RDT&E funding for vital space capabilities. The money is flowing, but investors have decided the incumbents are no longer the best way to invest in the upcoming opportunity.
The New Defense Winners May Be Hiding Among 300 Allied Companies
King proposed a new framework for investors considering investments in defense companies. “We are coming out with the Allied Defense League, which specifically focuses on the 300 companies that are the most important to compete against adversarial countries, many of which… one third of the list is international, which we’ve never seen before,” he said.
92 of the 300 companies are international, up from 84 last year, a structure King describes as unprecedented. That mirrors what Goldman Sachs Asset Management flagged as a 2026 megatrend, citing the +€800 billion in EU defense spending in the ReArm Europe Plan 2030 as evidence that allied balance sheets are now doing structural work.
Recent contract flow reinforces the pattern. Raytheon UK’s Omnia Training consortium just secured a £2 billion, 15-year contract from the UK Ministry of Defence to build the British Army’s Collective Training System, with 270 new UK jobs created. The transaction is a template for how allied budgets now anchor programs that once ran through Washington first.
Space Has Become Its Own Defense Battleground
King still sees the US as a winner. “The US still owns the AI, the compute, the strategic resources, but increasingly, the allies own the strike verticals, the iterable drone type things that are outside of the core,” he said. His conclusion for portfolio construction: “Instead of thinking US hegemony, now we’re thinking this is an allied play. That’s how we win in the future.”
Space is treated as its own vertical. “Space is [an] entire own category. SpaceX is one of those eight. SpaceX is dominated by the US, as you might imagine. But there’s other players that are coming out like ICEYE and others that do some very interesting things… really critical to the allied play,” King said. As an example of space companies coming into the public light, Blue Origin is raising $10 billion at a $130 billion valuation, its first outside capital.
What to Watch Next
The FY 2027 budget request totals $1.45 trillion; Europe is committing more than €800 billion through its ReArm Europe Plan; and allied governments are awarding multibillion-dollar contracts for munitions, drones, space, training, and other strategic capabilities.
King’s argument is which stocks are benefiting from this increased military spending. Lockheed Martin has fallen more than 20% since February 20, Northrop Grumman has declined nearly 26%, and the leveraged DFEN aerospace and defense fund is down approximately 15% over the same period. Meanwhile, private companies, specialized operators, and international allies are gaining importance across the eight defense verticals King tracks.
Contact [email protected] for any questions or corrections.
Top Gaining Stocks
Top Losing Stocks