Defense budgets are expanding rapidly on both sides of the Atlantic, turning aerospace and defense contractors into one of the market’s most prominent long-term investment themes.
The Invesco Aerospace & Defense ETF (NYSEARCA: PPA) gives investors access to 63 companies spanning aerospace, defense, homeland security, and related technologies in a single trade.
Despite holding dozens of stocks, the fund is more concentrated than it first appears, with RTX, GE Aerospace, Boeing, and Lockheed Martin together accounting for roughly 30% of the portfolio.
As of September 18, 2026, RTX represented approximately 8.35% of PPA’s holdings, followed by GE Aerospace at 6.91%, Boeing at 6.88%, and Lockheed Martin at 6.66%.
General Dynamics and Northrop Grumman add a further 9.94%, meaning a hypothetical $100,000 investment puts nearly $38,740 into just the top six positions.
The investment thesis behind PPA rests heavily on government spending commitments, as defense contractors rely on multi-decade purchase programs and long-term government contracts for the bulk of their revenue.
The 2025 reconciliation legislation provided the Department of Defense with approximately $156 billion in additional mandatory defense funding available through September 2029, while the Pentagon’s fiscal 2026 plans included approximately $384 billion for acquisition spending covering procurement, research, and development.
The NATO dimension adds further fuel to the thesis, with member nations agreeing in 2025 to work toward spending 5% of GDP annually on defense and defense-related priorities by 2035, with at least 3.5% earmarked for core military requirements.
European NATO members and Canada had already increased combined defense expenditures by nearly 20% in real terms during 2025, signaling that higher spending is already underway rather than purely aspirational.
For contractors held within PPA, that environment could translate into years of orders for aircraft, missiles, ammunition, ships, drones, communications equipment, and other defense systems.
The fund’s composition is not a straightforward basket of weapons makers, with roughly 87% of the portfolio falling within industrials and another 8% in information technology, alongside smaller positions in newer names such as Palantir and Rocket Lab.
The businesses behind the top holdings also differ meaningfully, as GE Aerospace is primarily an aircraft-engine company, RTX combines major defense operations with commercial aerospace, and Boeing carries significant commercial aviation exposure alongside its defense work.
Convenience carries a measurable cost, with PPA charging an expense ratio of 0.58%, equivalent to approximately $580 annually on a $100,000 investment, against a total asset base of approximately $7.62 billion.
Rising government budgets do not guarantee rising share prices, and investors face risks including program delays, cost overruns, stretched valuations, and commercial aerospace volatility, with Boeing having returned -5.39% over the past five years.
PPA closed September 18 at $159.78, well below its 52-week high above $186, with the fund down roughly 11% over the prior month and year-to-date returns sitting at approximately 2%.
For investors who want broad defense exposure without selecting individual contractors, PPA delivers decades of established history dating back to 2005 and a clear long-term catalyst, but the portfolio’s performance will still depend heavily on a relatively small group of aerospace and defense giants.
