EU defense sector to hold more money until 2025 By Investing.com

Investing.com – The European defense sector is expected to maintain its value over the broader market through 2025, boosted by increasing pressures on military spending driven by political factors, especially ts the influence of the former President of the United States, Donald Trump.

BofA Securities analysts point out that Trump’s calls for NATO members to increase defense spending to 5% of GDP.

According to BofA Securities, NATO’s focus on strengthening air defense capabilities, offensive weapons systems, and nuclear deterrents, as well as increased financial commitments, highlights a positive outlook for of European defense firms.

The alliance’s recent moves to raise spending targets to 3% of GDP, as well as Trump’s push for more aggressive commitments, show the change is likely to keep industry standards high.

The increased spending needs come as a result of rising political tensions, particularly in Eastern Europe and the Arctic regions.

Currently, European defense companies are trading at lower prices than their US counterparts, a shift from historical trends when they were lagging behind. Analysts attribute this change to improved growth trends and a growing awareness of Europe’s important role in global security.

The high ratings reflect confidence in the sector’s earnings potential and its ability to contribute to the expansion of financial standards across NATO countries.

In addition, the emergence of new defense technology firms is changing the competitive landscape on both sides of the Atlantic. Companies like Helsing in Europe and Anduril in the US are challenging traditional defense contractors with new offerings, such as drone swarm technology and precision weapon systems.

BofA analysts mark this trend as an important part of the future strength of the industry, and new investors are injecting new energy into the sector.

Overall, a combination of environmental pressures, strategic changes within NATO, and disruptive technological advances are setting the stage for the European defense industry.

BofA Securities projects that the sector’s strong valuation will continue through 2025, supported by strategic data and market confidence in the industry’s resilience and adaptability.