By Katherine Hamilton

Defense stocks climbed after President Trump said the next defense budget may reach as much as $1 trillion, quelling fears of spending cuts.

Shares of Palantir Technologies rose 8% to $84.05 on Tuesday, while General Dynamics and Boeing were both up 5% to $260.12 and $145.365, respectively. Northrop Grumman and Lockheed Martin gained about 4% each.

President Trump said on Monday the defense budget would be in the vicinity of $1 trillion, and Defense Secretary Pete Hegseth later that day posted on X that the first $1 trillion defense budget was "coming soon."

"It's not a huge shift, but it at least puts a floor under what it was," Wells Fargo analyst Matthew Akers said. "A couple months ago Trump was talking about cutting defense spending in half."

A trillion-dollar budget would be about $50 billion to $100 billion more than what was already expected for fiscal year 2026, Akers said. The forecast for the coming year was between $900 billion and $950 billion, he said. The current-year defense budget is about $850 billion.

In February, Trump was talking about slicing the defense budget, adding there was "no reason for us to be spending almost a trillion dollars on military." That same month Hegseth proposed cutting 8% of the defense budget--or about $50 billion--annually for the next five years.

The budget could also help infuse some more funding into aerospace and defense companies who are at risk of losing European customers, Deutsche Bank analyst Scott Deuschle said in a note. European countries have said they plan to become less dependent on the U.S. for defense in light of tensions when it comes to the war in Ukraine war and tariffs.

"This does sort of offset some of that pressure," Akers said.

There is still a question about how $1 trillion would be distributed, and that would have an affect on which companies would benefit from the budget, Seaport Global Securities analyst Richard Safran said. There may still be some programs that get cut if Trump follows through with his plan to invest more in a missile defense system he calls the golden dome.

"If all the money goes to operations and maintenance, that's a big yawn," Safran said. "That's not one of the primary markets for defense companies."

Trump's budget proposal is also just a request, so it's possible Congress may approve more or less spending. Safran expects Congress to approve a higher budget as companies face supply-chain issues and aging equipment.

"A lot of people recognize the dire strait of U.S. equipment," he said. "Don't be surprised if the final budget is more than $1 trillion."

Write to Katherine Hamilton at katherine.hamilton@wsj.com

(END) Dow Jones Newswires

April 08, 2025 12:57 ET (16:57 GMT)

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