Defence versus AI

Defence stocks are on the rise, also in Europe. Rheinmetall AG stock increased 376% since December 2021, Dassault Systèmes +244%, Leonardo +200%, BAE Systems +126% and SAAB +90%. These returns are comparable to NVDIA (+146%) over the same period. Defence spending is increasing with the geopolitical threats Europe is facing and a needed catch-up in defence spending after decades of underinvestment since the fall of the iron curtain. Europeans are trying to develop their own defence industry at warp speed. Is this all in the stock prices? Rheinmetall now trades at 25 times forward Price-to-Earnings and analysts estimate a 34% per year earnings growth rate over the 5 years to come. This compares to NVDIA 35 times forward Price-to-Earnings and 27.5% per year estimated earnings growth rate over the 5 years to come.