Recent years have seen the U.S. continue on its path of increasing the nation’s already staggering defense budget, and the E.U. conclude it needs to remilitarize with a program worth nearly $1 trillion. By early 2026, governments appear to have decided on the direction for improving their armed forces: artificial intelligence (AI) and drones.
Thus, in January, several relatively obscure companies have emerged as possibly the best military and military-related stocks for investors seeking growth or stability that can only be afforded by contracts with nation-states.
Dassault Aviation (EPA: AM)
The French aeronautics giant, Dassault Aviation (EPA: AM) – the company perhaps best-known for producing the Rafale multirole fighter – already saw massive stock market success through 2025.
Indeed, AM stock is up 52.94% in the last 12 months and is, at press time on January 16, changing hands at €312.60 ($362.89) as it is one of the great beneficiaries and anticipated beneficiaries of the European Union’s generous rearmament program.
Despite the Dassault shares appearing expensive after the great rally, the equity still have plenty of room to grow with the latest bullish catalyst coming from the planned integration of AI.
Specifically, Dassault invested $200 million in Harmattan AI, a startup specializing in developing low-cost, scalable, and autonomous systems. The partnership will enable the AI company to expand its work into the fields of electronic warfare, drone interception, and surveillance and intelligence.
Howmet Aerospace (NYSE: HWM)
Unlike Harmattan AI, Howmet Aerospace (NYSE: HWM) is, by any measure, a rather old and well-established company, considering it was founded late in the 19th century and serves as a major supplier for defense giants such as Lockheed Martin (NYSE: LMT).
Despite this, the company has been enjoying newcomer-like growth in the last 12 months with HWM stock rallying 82.81% within the time frame to its press time price of $224.82.
The rise of Howmet shares can be linked to the company’s exceedingly strong results in 2025, exemplified by a 14% revenue growth and continuous increases in its forward-looking guidance.
The company has also pivoted to higher-margin aftermarkets and critical engine component manufacturing.
Indeed, as a producer of advanced aeroplane parts and a supplier for giants like Lockheed, it stands to reason that the HWM stock rally will persist in 2026 and into 2027, especially if President Donald Trump’s request for the U.S. to increase its military budget to $1.5 trillion – more than 66% higher than the latest confirmed figure – gets approved.
Mercury Systems (NASDAQ: MRCY)
Mercury Systems (NASDAQ: MRCY) is a long-standing partner for the U.S. – and 34 other – governments, specializing in mission-critical processing technologies for defense and aerospace applications.
Its role has enabled MRCY stock to rally a remarkable 40.99% since 2026 started and to reach, by press time on January 16, an all-time high of $102.94.
This latest rally has largely been driven by a $60 million contract granted for work on two U.S. strategic and space weapons programs, and announced on January 15, that will utilize Mercury’s signal and radiation-hardened data processing capabilities.
Akin to both HWM and AM shares, MRCY stock is likely to continue surging as, on the one hand, the latest contract is set to run through 2031 and, on the other hand, the company is likely to have a long-standing relationship with the government as it has continuously been enjoying high-tech contracts for years.
Featured image via Shutterstock
Source: https://finbold.com/best-defense-stocks-to-buy-in-2026/