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European Defense Strategy as a Renewed Investment Pillar

January 12, 2026

Defense spending in the European Union has definitively shifted in recent years from the margins of political and investment interest to the center of attention. A combination of persistent geopolitical threats, the armed conflict in Ukraine, growing doubts about the long-term security commitments of the United States toward NATO, and a historical investment deficit is creating an environment in which Europe has no alternative but to significantly strengthen its own defense capabilities. Which companies are likely to benefit the most? European Defense Strategy as a Renewed Investment Pillar

Geopolitics

The fact that the world is entering a period of heightened geopolitical uncertainty is underscored by three recent signals. These include the widely reported U.S. intervention in Venezuela, rising tensions surrounding Greenland, and open discussions about the future of the transatlantic alliance. To this mix are added actions by European powers themselves—France and the United Kingdom have jointly declared the possible deployment of troops to Ukraine in the event of a peace agreement.

Budget Planning

From a financial perspective, the European Union is responding through the ReArm Europe initiative, whose total volume could ultimately reach up to EUR 800 billion. The primary objective is to push net military spending toward 2.5% of GDP, while in a broader security context, including cybersecurity, figures of up to 5% of GDP are being discussed. Importantly, this is not merely a short-term stimulus, but a long-term framework spread over several years to a decade. Funding sources are based on a combination of national budgets, European funds, and the increasingly active participation of private capital, which significantly enhances the stability of the overall investment story.

Výstřižek

Price performance of the Europe Total Market Aerospace & Defense index over the past five years

Markets Respond

This shift in dynamics is also reflected in equity markets. European defense companies recorded strong growth already in 2025, specifically 56.5%, and added nearly 20% in the first weeks of 2026.* From an investment perspective, it is noteworthy that shares of companies such as Rheinmetall, Leonardo, Hensoldt, Renk, and Saab are currently trading at lower valuations relative to their U.S. counterparts, even though their growth and profitability outlooks are at least comparable.

Structural Inevitability

At the core of the European Union’s investment effort lies the need to make up for years of neglected defense innovation. Short-term priorities today include tanks, armored vehicles, and ammunition. From a longer-term perspective, however, the next phase will involve more complex and capital-intensive systems—air defense, missile technologies, fighter aircraft, and naval capabilities.

Investment Perspective

The European defense sector is transforming from a peripheral and often politically sensitive topic into a fully-fledged investment pillar. The combination of geopolitical risks, massive public budgets, the involvement of private capital, and still relatively attractive valuations of the companies involved creates a potentially strong and long-term investment trend for investors seeking portfolio diversification. [1]

* Data relating to the past are not a guarantee of future returns.

[1] Forward-looking statements represent assumptions and current expectations that may not be accurate or may be based on the current economic environment, which may change. These statements do not guarantee future performance. By their nature, forward-looking statements involve risks and uncertainties, as they relate to future events and circumstances that cannot be predicted, and actual developments and results may differ materially from those expressed or implied in any forward-looking statements.

Disclaimer! This marketing material is not and must not be understood as investment advice. Data relating to the past are not a guarantee of future returns. Investing in foreign currencies may affect returns due to exchange rate fluctuations. All securities transactions may result in both profits and losses. Forward-looking statements represent assumptions and current expectations that may not be accurate or may be based on the current economic environment, which may change. These statements do not guarantee future performance. InvestingFox is a trading brand of CAPITAL MARKETS, o.c.p., a.s., regulated by the National Bank of Slovakia.

Sources:

https://www.cnbc.com/2026/01/13/europe-defense-nato-greenland-crisis-venezuela-military-fuel-war-spending-invasion.html
https://www.cnbc.com/2026/01/09/nato-trump-greenland-war-invade-defense.html
https://www.cnbc.com/2026/01/07/us-venezuela-military-operation-maduro-injuries-casualties.html

Palo Alto Networks under pressure: AI acquisitions raise costs and squeeze profitability

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Palo Alto Networks is among the biggest players in cybersecurity and, in recent years, has been built around a simple goal: to be a platform that covers as many security needs at once as possible. In practice, this means rapid expansion of the portfolio, a strong emphasis on automation, and increasingly also security for AI applications and AI agents. However, this strategy comes at a clear cost. Acquisitions accelerate growth and expand the addressable market, but they also bring integration costs, higher spending on development and sales, and short-term pressure on margins. That is exactly what has become the main theme around PANW shares in recent weeks.

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In the investment world, it is often said that markets look forward, not backward. Amazon’s economic results for the fourth quarter of 2025 are a perfect example of this principle. Although the technology giant delivered historically record revenues and confirmed the expansion of its key divisions, the share price reacted with a relatively sharp decline.* The reason, however, lies not in the past, but in an ambitious investment plan for 2026.

Czechoslovak Group (CSG) Successfully Lists on the Stock Market: What Are the Next Prospects?

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Czechoslovak Group (CSG), a Czech defense group with over 30 years of tradition, has successfully made its way onto the Amsterdam Stock Exchange, marking the start of its journey to become a leader in the global defense industry. Following its Initial Public Offering (IPO), CSG’s shares increased by 31.4%, raising the company’s market capitalization to approximately CZK 770 billion.* CSG has thus immediately surpassed ČEZ, a clear indicator of its growing strength and investment appeal.

David Matulay

Analyst

David Matulay is an analyst at InvestingFox. He joined the company in 2023 as Head of Trading and Portfolio Manager. Prior to that, he gained three years of experience as a financial analyst at Advena Hedge Fund.
David graduated in Industrial Informatics from the Secondary Industrial School of Electrical Engineering in Bratislava and in Finance, Banking and Investing from the University of Economics in Bratislava. He is currently studying international and diplomatic studies at the University of International and Public Relations in Prague.

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