Entering A New Era of Defense Tech Spending

The global defense sector is entering a new super-cycle, driven by intensifying geopolitical pressures and a structural shift toward technology-led military capabilities. The world’s rising military burden – the share of global GDP spent on defense – rose to a record 2.5% in 2024, underscoring the growing urgency.¹ In the United States, the defense budget could reach $1 trillion nearly five years ahead of schedule, signaling a dramatic fiscal reprioritization under the current administration.² Meanwhile, NATO allies are pursuing greater self-reliance, committing to raising defense spending targets from 2% to 5% of GDP by 2035.³

Yet the most meaningful aspect of this transformation lies not in how much is being spent, but in how it’s being spent. Historically, defense budgets focused on weapons procurement. Today, as militaries seek to digitally modernize their defense stack, spending is increasingly allocated towards Research, Development, Test, and Evaluation (RDT&E) in an effort to integrate AI, autonomous systems, and cybersecurity. Militaries are moving beyond conventional weapons platforms, channeling investment into advanced command networks and defense frameworks designed to deliver the speed, precision, and resilience modern warfare demands.

Key Takeaways

1. Global military expenditures have increased every year for a decade, reaching a record $2.7 trillion in 2024.⁴ This broad-based surge represents a global phenomenon not limited to leading military nations.
2. Defense spending is increasingly flowing toward digital modernization, AI systems, autonomous platforms, and cybersecurity rather than traditional weapons and vehicles.
3. The Global X Defense Tech ETF (SHLD) provides targeted exposure to companies driving the technological transformation of defense, and we believe is positioned to benefit from the realignment of a multi-trillion dollar industry.

The modernization of defense marks one of the most profound industrial shifts in generations. As global powers invest in AI, cybersecurity, and autonomous systems, the defense sector is entering an era that combines traditional arsenals with digital deterrence, where physical strength is reinforced by data-driven superiority. This structural transformation is expected to sustain elevated defense budgets for years to come, fueling innovation across hardware, software, and critical infrastructure. For investors, the convergence of technology and defense represents a multi-year growth theme that could redefine both global security and a key sector of the economy.

Click here to delve into the investment case behind Defense Technology.

¹ SIPRI. (2025, April.) Trends in World Military Expenditure, 2024

² Bloomberg. (2025, April 7). Trump, Hegseth Tout $1 Trillion in US Defense Budget.

³ CNBC. (2025, June 25). NATO Allies Agree to Higher 5% Defense Spending Target.

⁴ Global X ETFs estimate with information derived from: SIPRI. (2025, April). Trends in World Military Expenditure, 2024.