Defense Stocks in Focus After US Approves $11.1B Taiwan Arms Sale
Lockheed Martin and RTX positioned to benefit from one of the largest U.S. military sales to Taipei, bolstering order backlogs amid rising geopolitical tensions.
Shares of major U.S. defense contractors, including Lockheed Martin (NYSE: LMT) and RTX Corp. (NYSE: RTX), are poised for gains after the U.S. State Department notified Congress of its approval for a potential $11.1 billion military arms sale to Taiwan. The move provides a significant tailwind for the aerospace and defense sector, enhancing revenue visibility for prime contractors involved in the deal.
The comprehensive package is designed to bolster Taiwan's self-defense capabilities against rising pressure from Beijing. According to reports, the sale is expected to include advanced and battle-tested weaponry such as High Mobility Artillery Rocket Systems (HIMARS), anti-tank missiles, drones, and related support equipment. The sale underscores the U.S. commitment to providing Taiwan with the means to defend itself under the 1979 Taiwan Relations Act.
For defense industry giants, such a large-scale foreign military sale translates directly into bolstered order backlogs and more predictable revenue streams. Lockheed Martin, a company with a market capitalization of over $111 billion, and RTX, valued at more than $241 billion, are the primary manufacturers for many of the systems likely to be included. While the formal contracts will be finalized following congressional review, investors are anticipating a material impact on earnings over the next several years.
The announcement comes as geopolitical tensions remain a key driver for the sector. The U.S. approval of the $11 billion arms sale is one of the largest of its kind for Taiwan and reinforces a period of sustained demand for military hardware globally.
However, the deal is not without political fallout. Beijing has consistently opposed U.S. arms sales to Taiwan, viewing them as an infringement on its sovereignty. In the past, China has responded by imposing sanctions on American defense firms. Following previous sales, Beijing has placed sanctions on both Lockheed Martin and a subsidiary of RTX, though U.S. officials have often characterized the measures as largely symbolic given the companies' lack of defense business with mainland China.
Nonetheless, the persistent demand for advanced defense capabilities from U.S. allies in a volatile global landscape continues to underpin a bullish outlook for the sector. This latest sale to Taiwan serves as a powerful catalyst, reaffirming the strategic importance of top-tier defense contractors in executing U.S. foreign policy and security objectives, a factor that is likely to keep institutional investors closely engaged with the sector.