As the US and other nations reconsider trade relationships and political alliances, governments around the world are taking steps to prioritise security.
There has been a recognition among US allies that they must become more self-sufficient in terms of their own defence. In the first quarter of 2025, Germany disclosed plans for aggressive fiscal stimulus focused primarily on defence and infrastructure spending. In December 2024, Japan's cabinet approved a 9.4% increase in its defence budget.[1]
This trend towards autonomy is likely to remain beyond the current US administration, bringing potential tailwinds for companies along the defence supply chain for the next five to 10-years.
However, the push for security extends beyond military defence to reliable energy sources, stable infrastructure and secure supply chains.
The US and Europe are both seeking to expand sources of traditional energy, as well as pursuing development of nuclear power and other alternatives.
The energy transition away from hydrocarbons is progressing slowly but remains a critical component of long-term energy security. Investments in renewables, energy storage,
and infrastructure are key to reducing dependence on traditional energy sources.
In Europe, energy independence effectively means more renewables and less imported hydrocarbons. The main bottlenecks are the transmission and distribution grids. In 2024, 46% of EU electricity generation was from renewables.[2] The existing infrastructure has not kept up with this level of growth, creating a favourable political and regulatory backdrop for networks.
Artificial intelligence (AI) has enabled more efficient and effective cyber-attacks. The frequency of global cyber-attacks increased 23% per annum over the past five years, compared with 10% p.a. in the five years previous.[3] However, growth in cyber security spend is forecast to be just half of that necessary. This dislocation may represent a continued runway for growth and profitability for cyber security-focused companies.
Of course, higher government investment over the long term will not benefit all industrial companies equally. Going forward, deep research will be crucial to find opportunities.
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[1] Japan Ministry of Defense, FY 2024 Budget Request
[2] European Union - World Energy Investment 2024 – Analysis IEA
[3] Statista
