From fighter jets to semiconductors, governments worldwide are pouring resources into security and autonomy. This convergence is creating what analysts call the defense tech economy 2025—a durable new sector with multi-year growth visibility. It also aligns with long-term trends in our Scenario Outlook (2025–2026).
Global Rearmament
European nations are racing to re-arm, with defense budgets climbing year after year. U.S. spending remains steady at around 3–3.5% of GDP, while Asia is rapidly scaling both military and technology investment. This surge connects directly to our Defense & Tech Autonomy hypothesis, which argues that security and technology are fusing into a new economic driver.
Semiconductor Sovereignty
Alongside weapons and defense platforms, states are channeling billions into semiconductor fabs, cyber defense, and space systems. Sovereign industrial policies aim to reduce reliance on foreign technology and insulate national security supply chains. This intersects with our China Tech Sovereignty thesis, where Beijing leads the charge on autonomy in semiconductors and AI.
Investor Outlook
The defense tech economy offers record order backlogs, multi-year visibility, and relative value in Europe compared to the U.S. For investors, this means opportunities across defense primes, semiconductor firms, and cybersecurity leaders. Risks include political turnover, export controls, and supply chain bottlenecks. Yet the overall trajectory is clear: security and autonomy are now economic imperatives.
Final Thought
The rise of the defense tech economy in 2025 shows how geopolitics and markets are converging. For governments, it is about sovereignty and survival. For investors, it is a structural trend reshaping global industries and capital flows.
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