Defense stocks caught a serious bid Thursday morning after President Trump announced his vision for massively expanding U.S. military spending. But this wasn't your typical Washington rally-the-troops moment. Trump delivered both carrot and stick, promising a 50% budget increase while simultaneously calling out defense contractors for what he sees as their misplaced priorities.
Northrop Grumman Corp. (NOC) led the charge with a 7.82% jump in pre-market trading, while Lockheed Martin Corp. (LMT) climbed 6.52%. L3Harris Technologies (LHX) gained 6.29%, and RTX Corp (RTX) shares rose 4.45% despite being specifically called out by the president.
The $1.5 Trillion Vision
On Wednesday, Trump laid out his ambitious plans for military spending, declaring that "Our Military Budget for the year 2027" should hit $1.5 trillion instead of the current $1 trillion baseline. He framed the increase as necessary for building what he called a "dream military." That's the kind of spending commitment that typically sends defense stocks into orbit, and Thursday morning's trading reflected exactly that enthusiasm.
But hours before announcing the budget increase, Trump posted a very different message on Truth Social. He slammed defense companies for prioritizing dividends and stock buybacks over investments in manufacturing capacity. According to Trump, this financial engineering approach has led to frustratingly slow deliveries of critical military equipment.
Raytheon Takes the Heat
The president reserved his sharpest criticism for RTX Corp's Raytheon division. In a separate post, Trump stated that Raytheon needs to invest more in "upfront Investment like Plants and Equipment" or risk losing its contracts with what he now calls the Department of War. He went further, claiming that the Department of War has identified Raytheon as the least responsive defense contractor currently operating.
That's quite a statement to make about a company that's been actively expanding its footprint. Raytheon secured a massive $1.7 billion contract in December 2025 to provide Spain with four Patriot air and missile defense systems. Three months earlier, in September 2025, the company landed a $26 million rocket motor deal that strengthened its defense manufacturing capabilities.
The tension here is interesting. Trump wants more defense spending and better defense production, but he's openly questioning whether current contractors are allocating capital efficiently. It's the business equivalent of ordering more food while complaining about how the kitchen is run.
Strong Performance Despite Presidential Criticism
Whatever Trump's concerns about capital allocation, RTX has been delivering for shareholders. The stock has climbed 60.22% over the past year, according to market data. Performance metrics show RTX ranking in the 91st percentile for quality and 88th percentile for momentum, suggesting the company is executing well on both operational fundamentals and market positioning.
On Wednesday, before Thursday's pre-market rally, RTX shares dipped 2.45% to close at $660.62. The mixed messages from Washington created an unusual dynamic: investors are pricing in higher defense spending while simultaneously processing threats about contract losses if companies don't shift their investment strategies.
The broader defense sector clearly decided to focus on the $500 billion spending increase rather than the presidential finger-wagging. When the government signals it wants to spend 50% more on defense, that tends to drown out other concerns, at least in the short term. Whether Trump follows through on his threats to redirect contracts away from companies he views as underinvesting remains to be seen, but for now, defense stocks are treating this as unambiguously good news.
