Defense Stocks Climb as House Passes $895 Billion Military Bill
Legislation authorizes major spending on shipbuilding, R&D, and next-gen technology, signaling a robust revenue pipeline for top contractors.
Shares of major U.S. defense contractors advanced after the House of Representatives passed a sweeping $895.2 billion defense policy bill, reinforcing a strong outlook for military spending and providing clear revenue visibility for the sector into the next fiscal year.
The National Defense Authorization Act (NDAA) for Fiscal Year 2025, which sets policy and authorizes spending levels for the Department of Defense, was approved in a decisive vote. The passage sent a bullish signal to investors, highlighting sustained government investment in national security amid a complex geopolitical landscape.
Market reaction was broadly positive across the defense industry. General Dynamics (GD), a key contractor in naval shipbuilding, saw its stock rise 2.38% in trading. RTX Corp (RTX) also gained, climbing 1.62%, while shares of Lockheed Martin (LMT), the world's largest defense contractor, posted a modest gain of 0.22%.
The legislation earmarks significant funding for key modernization priorities. According to a summary from the Senate Armed Services Committee, the bill includes $33.5 billion for the procurement of seven new battle force ships, a development that directly benefits General Dynamics' Electric Boat and Bath Iron Works shipyards. It also authorizes $143.8 billion for Research, Development, Test, and Evaluation (RDT&E), signaling a continued push toward next-generation capabilities in areas like artificial intelligence, cybersecurity, and unmanned systems.
This year's bill reflects a strategic shift in procurement, with the Pentagon recalibrating its priorities. While legacy programs remain funded, there is a discernible pivot from acquiring additional F-35 fighter jets toward investing in missiles, drones, and future platforms like the Next Generation Air Dominance (NGAD) program. This pivot underscores the military's focus on countering near-peer adversaries and adapting to new forms of warfare.
The bill's passage comes amid a constrained fiscal environment, adhering to the spending caps established by the Fiscal Responsibility Act. House Armed Services Committee Chairman Mike Rogers acknowledged the budget limitations, stating, "This is the hand dealt to us by the Fiscal Responsibility Act... we will play that hand that was dealt to us," according to a Congressional Research Service report.
Despite the budget caps, analysts view the NDAA as a crucial blueprint for the industry. The bill provides a "reliable indicator of congressional sentiment on funding for particular items," note analysts at law firm Greenberg Traurig, who point to the legislation's strong focus on strengthening the U.S. defense industrial base and supply chain resilience. The act also includes provisions aimed at streamlining the acquisition process and reducing barriers to entry for non-traditional defense contractors, potentially fostering greater innovation and competition.
While the NDAA authorizes spending, the actual funds will be allocated through a separate appropriations bill. However, the strong bipartisan support for the policy framework provides contractors with the stability needed for long-term planning and investment. With global tensions remaining high, the bill's passage solidifies expectations for a continued, robust demand for advanced American military technology and hardware for the foreseeable future.