Defense Industrial Base — Strategic Materials & Components

Guggenheim analyst Michael Ciarmoli initiated coverage of almost two dozen defense stocks on September 15, issuing 13 Buy ratings with an average upside of roughly 50% and naming Applied Aerospace & Defense, Inc. as his top pick. Ciarmoli sees AADX around $30, up about 150% from the share's closing price that day, roughly three times the average upside across his 13 Buy-rated names. He described the company as a merchant supplier of established and proven military subsystems and components, well positioned to benefit from growth in aerospace, defense, and space, and argued that investor fears over a split Congress and spending gridlock are overblown. AADX, which went public on June 2, ended the second quarter with a backlog of $1.1 billion, though it has reported only one quarterly result so far, posting a significant loss, and carries controlled company status with no multi-year trading history. According to Insider Monkey's database, 33 hedge funds held a stake in the company at the end of the second quarter.

Steel and materials stocks swung between rallies and pullbacks as the US-Canada trade relationship shifted from near agreement to open dispute, with the US imposing 50% tariffs on a wide variety of Canadian exports on August 22. Nucor Corporation and Cleveland-Cliffs Inc. rose on August 25 after talks between the two countries broke down, a reversal from the prior week when several of the same stocks fell on hopes a deal would lower steel and aluminum tariffs; the VanEck Steel ETF gained 1.6% that day while the State Street Materials Select Sector SPDR hit an intraday high, though by week's end the materials ETF had slipped to negative territory and the steel ETF was about flat, with both still substantially up for 2026. The escalation followed a Bloomberg report on August 19 that the US and Canada had tentatively agreed to cut tariffs on Canadian steel and aluminum to 25% and vehicle charges to 15%, before Canadian Prime Minister Mark Carney declared Canada officially "at war" with the United States and Ottawa announced counter-tariffs of C$27.6 billion on American goods, effective September 8 at rates of 15% to 50%. Moody's chief credit officer Atsi Sheth said, "Expect much more of this uncertainty for some time to come." Nucor, which relies primarily on scrap-based electric arc furnace steelmaking, is up more than 50% year-to-date, while the vertically integrated Cleveland-Cliffs remains negative for 2026 despite similar structural insulation, which analysts attribute to balance sheet stress rather than tariffs.

GE Aerospace said Tuesday it agreed to acquire Consolidated Precision Products for $11.75 billion, expanding its control over the supply of specialized castings used in commercial aircraft engines, military equipment and industrial gas turbines. The deal headlines a busy week of M&A across sectors. Copart agreed to acquire ACV Auctions for $10.50 a share in cash, an implied equity value of about $1.9 billion, while Analog Devices will acquire Alif Semiconductor in an all-cash transaction for $1.35 billion. Bending Spoons agreed to acquire collaborative-workspace company Miro at an enterprise value of $1.355 billion in an all-cash deal expected to close in the fourth quarter of 2026. Tamarack Valley Energy agreed to acquire Headwater Exploration in an all-stock deal valued at C$10B, about US$7.25B, creating the largest publicly traded oil producer focused on Alberta's Clearwater formation, and EverBank Financial agreed to acquire Pacific Northwest bank WaFd in a $3.9B reverse merger creating a regional bank with about $75B in assets. Meta Platforms purchased Swedish AI startup Stilla.ai, Apple acquired Sonera Magnetics in a deal disclosed by the European Commission, Grab Holdings is said to be in talks for a majority stake in Atome Financial, and ARC Group Acquisition I agreed to acquire Malaysian licensed financing company Firstborn Top Capital.

GE Aerospace fell about 2.8% to $325.52 on Wednesday after announcing its $11.75 billion takeover of Consolidated Precision Products, a maker of specialized castings that have become a production bottleneck in the jet-engine industry. The deal will be funded with roughly $7 billion in cash and the assumption of remaining debt. CPP is projected to generate about $2 billion in 2027 revenue, with engine components representing about 70% of sales. GE expects demand for airfoils to climb 30% by 2030, and the acquisition could help it address a backlog exceeding $210 billion. However, the purchase price is nearly four times GE's second-quarter free cash flow of $3.03 billion, and the stock trades 20.03% above its GF Value estimate of $271.19, leaving little margin for integration risks.

Bombardier shares fell 6.4% after President Donald Trump threatened to ban the Canadian planemaker from selling aircraft in the United States unless it builds planes there. In a Truth Social post, Trump wrote "NO MORE SELLING BOMBARDIER IN THE UNITED STATES!" and criticized the Montreal-based company's products. Bombardier relies on the US for more than half of its revenue, and the threat follows similar White House pressure in January over the Global Express lineup. The move coincides with Ottawa's new counter-tariffs on US goods, escalating trade tensions. Analysts warn that a ban could disrupt Bombardier's US service networks and suppliers, hurting the broader aerospace sector.

Howmet Aerospace Inc. has fallen nearly 20% from its record high after SpaceX announced plans to make gas-turbine components in-house, but Citi believes the selloff is overdone and maintains a Buy rating with a $329 price target, implying about 34% upside from Monday's $244.95 close. The concern stems from Elon Musk's revelation that SpaceX aims to cast turbine blades and vanes internally to support a 20-gigawatt power plant for AI data centers in Texas. Citi, however, views this as a sign of limited industry capacity rather than a direct threat, noting that SpaceX is developing mostly for its own needs and still plans to rely on the existing turbine supply chain. This is significant because Howmet's gas-turbine segment is already expanding rapidly, with first-quarter revenue surging 39% following a 25% increase in 2025. Bernstein also raised its price objective on Howmet to $328 from $248, and the company is expanding turbine blade capacity by up to 38% from first-quarter 2025 levels. The key question for investors is whether SpaceX will become a true competitor or simply confirm that AI-driven electricity demand is outpacing turbine capacity availability.

GoPro Inc stock surged 72.3% to $1.51 after Markiplier disclosed an 8.5% stake worth $9 million, driving 87,000 options contracts, 11.9 times the usual volume, with calls at 74%. Novartis AG rose 6.5% to $162.01 on positive late-stage trial results for its multiple sclerosis pill, with 13,000 options traded, 2.9 times the norm, and puts at 83%. Comstock Resources Inc gained 6% to $15.30 after announcing a $1.65 billion strategic partnership with SOCAR and a $450 million drilling joint venture with the Jones family, with options volume at 2.8 times the usual and calls at 96%. Howmet Aerospace Inc climbed 3.9% to $254.50, rebounding from a selloff triggered by Elon Musk's SpaceX turbine announcement, with 12,000 options traded, 2.5 times the norm, and puts at 93%. Fervo Energy Co jumped 23.7% to $19.03 after securing its largest-ever power agreement with Google for nearly 400 megawatts from its Utah project, with 8,779 options, 2.7 times the usual volume, and calls at 95%.

U.S. steel and aluminum stocks surged and then retreated last week as the escalating trade war between the United States and Canada sent investors scrambling to reprice exposure to North American metals supply chains. The State Street Materials Select Sector SPDR (XLB) reached a new intraday record on Monday, Aug. 25, but by Friday's close it had slipped into the red for the week, while the VanEck Steel ETF (SLX) was essentially unchanged. Through Aug. 28, SLX has gained more than 28% on the year and XLB more than 18%. The swing reflects the complexity of a trade war between two countries whose metals industries are deeply intertwined. Dan Luttner, managing partner of NEOS by Argon & Company, characterized the initial stock move as a repricing reflex rather than a durable signal, noting that Nucor and Cleveland-Cliffs use electric arc furnace technology with no dependence on Canadian ore or slab, positioning them to capture tariff-driven pricing benefits. However, Cleveland-Cliffs stock is in negative territory for 2026 due to balance sheet stress, and Century Aluminum remains exposed because its raw inputs largely still flow across the Canadian border. Atsi Sheth, chief credit officer at Moody's Ratings, said uncertainty will persist, while Scott Beaulier, a University of Wyoming economics professor, urged caution against drawing firm conclusions from early stock moves. Canada announced counter-tariffs on $27.6 billion worth of American goods last Tuesday, matching a 50% U.S. tariff on Canadian exports, with measures scheduled to kick in on Sept. 8. President Donald Trump has separately threatened to raise tariffs on Canadian autos, trucks, and steel to 50% on Jan. 1, 2027.

Elon Musk has confirmed that SpaceX is building a foundry in Bastrop, Texas, to cast gas turbine blades and vanes in-house, a move that could accelerate natural gas turbine production by up to 18 months and address a key bottleneck for AI infrastructure. Musk wrote on X that SpaceX and Tesla are each building 100GW/year of solar production capacity as fast as possible, but natural gas will still be needed to supplement and bootstrap solar for several years, and the limiting factor for gas turbine production is casting the blades and vanes. The foundry, which The Information reported on, will produce blades that must be cast as single unbroken crystals, a process mastered by only four companies worldwide, all currently at capacity. This capability would give Musk-controlled entities a manufacturing edge, but it also raises pollution concerns, as gas turbines have drawn lawsuits and health studies over emissions, including in Memphis where SpaceXAI operates turbines and in Virginia where a study estimated additional premature deaths and health damages.

NAVER D2SF, the corporate venture capital arm of NAVER, has made a new investment in F4GE, a defense and manufacturing infrastructure startup founded in January 2026. F4GE is building a programmable manufacturing network that integrates Korea's fragmented core manufacturing factories and connects them with global defense and advanced hardware companies. The company standardizes data from Korea's approximately 60,000 core manufacturing factories and converts it to meet global buyer requirements, supporting supply chain compliance for the U.S. Department of Defense. This investment round marks F4GE's first institutional funding, with participants including NAVER D2SF, KNET Investment Partners, Sazze Partners, DCAMP, and 500 Global. F4GE plans to expand hiring and manufacturing partnerships, while NAVER D2SF has launched an open call for startups in defense and manufacturing sectors, accepting applications until October 25.