Trump Signs F-35 Deal With Saudis: Defense ETFs to Gain, Beyond Lockheed

U.S. President Donald Trump has approved a major defense sale package, including future F-35 deliveries, with Saudi Arabia, a long-standing, non-NATO ally of the United States (as per a recent press release from White House). This decision should effectively boost the growth prospects of Lockheed Martin LMT, the prime contractor for the F-35 program, while also making Saudi Arabia the first Middle Eastern nation besides Israel to acquire this advanced aircraft.

This agreement, which also includes the sale of nearly 300 American tanks to Saudi Arabia, paves the way for more revenue generation for U.S. defense stocks and, by extension, defense exchange-traded funds (ETFs) with heavy exposure to America's largest defense contractor.

Why ETFs and Not LMT?

Now, given the present scenario, one might wonder why we are talking about defense ETFs and not focusing solely on Lockheed Martin for the F-35 deal. This is because, while LMT stands to benefit the most if the deal moves forward, its shares carry specific financial risks, including a high debt-to-equity ratio and recent pressure on margins. Notably, its debt-to-equity ratio is currently around 3.59, much higher than the industry’s comparable level of 1.06. 

A Defense ETF mitigates this exposure by ignoring the fundamental risks of single-stock investing. By offering exposure to diverse defense contractors like Boeing and Raytheon, defense ETFs capture the broader trend of rising defense spending and the deal's sector-wide halo effect without being singularly exposed to LMT’s execution or balance sheet challenges. 

Moreover, the F-35 program involves other prominent defense contractors like Northrop Grumman NOC, RTX Corp. RTX, and BAE Systems BAESY, which serve as major subcontractors in the manufacturing process of F-35 jets. Accordingly, the new F-35 sales agreement is likely to support profit margin expansion for all of  these contractors, making an ETF with broad defense exposure a more prudent investment option than a single stock.

Before offering you a handful of prospective defense ETFs that you may consider adding to your watchlist, let us delve a bit deeper into the long-standing relationship that America has with Saudi Arabia, in terms of defense industry, and how this F-35 deal might further strengthen it.

The Deepening US-Saudi Defense Ties With LMT at Center

The security relationship between the United States and Saudi Arabia is decades old, primarily serving as a counterbalance to regional rivals. This bond has translated into massive weapon exports. Latest data, published in April 2025, from the Stockholm International Peace Research Institute (SIPRI), indicates that between 2020 and 2024, the United States was Saudi Arabia's main arms supplier, with U.S. companies providing about 74% of the kingdom's arms imports. 

Among the major U.S. defense contractors supplying weapons to Saudi Arabia, Lockheed Martin stands out as the most prominent, having maintained a committed partnership with the Kingdom since 1965. In 2017, Saudi Arabia expressed its intent to procure more than $28 billion in integrated air and missile defense, combat ships, tactical aircraft, and rotary wing technologies and programs with Lockheed Martin. Today, LMT is working with Saudi Arabia to support these projects. This is a key indication of its established footprint in the Kingdom, and the recent F-35 sales will only further strengthen it. 

LMT apart, Boeing BA supports the Kingdom’s defense industry with the jet giant having delivered more than 400 defense platforms to the Saudi Arabian Armed Forces to date. This includes Boeing-made F-15SA fighters, AH-64E Apache attack helicopters and AH-6 light attack reconnaissance helicopters. 

RTX’s Raytheon unit is another supplier of defense products like the Patriot missile defense system to Saudi Arabia. Meanwhile, General Dynamics Corp.’s GD Land Systems unit supplies and services M1 Abrams tanks to Saudi Arabia.

Defense ETFs to Gain

Considering the aforementioned discussion, the latest deal opens the door for greater profit generation for all the defense contractors mentioned above, collectively, and thus makes a stronger case for defense ETFs that offer exposure to them.

Global X Defense Tech ETF SHLD

This fund, with net assets worth $4.95 billion, offers exposure to 42 companies positioned to benefit from the increased adoption and utilization of defense technology. Its top 10 holdings include RTX (8.66%), LMT (7.28%), BAESY (6.69%), GD (5.02%) and NOC (4.66%). 

SHLD has surged 71.9% year to date. The fund charges 50 basis points (bps) as fees. 

Invesco Aerospace & Defense ETF PPA

This fund, with net asset value of $148.97 per share, offers exposure to 60 companies involved in the development, manufacturing, operations and support of U.S. defense, homeland security and aerospace operations. Its top 10 holdings include RTX (8.77%), BA (7.20%), LMT (7.07%),  NOC (5.18%) and GD (4.98%). 

PPA has soared 30.4% year to date. The fund charges 58 bps as fees. 

iShares U.S. Aerospace & Defense ETF ITA

This fund, with net asset worth $11.84 billion, offers exposure to 39 U.S. companies that manufacture commercial and military aircraft and other defense equipment. Its top 10 holdings include RTX (16.23%), BA (7.30%), GD (4.63%), LMT (4.44%) and NOC (4.25%). 

ITA has surged 40.3% year to date. The fund charges 38 bps as fees.  
 

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This article originally published on Zacks Investment Research (zacks.com).

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