The possibility of Donald Trump‘s return to the White House has triggered a surge in investments in European defense-tech startups, as per industry executives and investors.
What Happened: Trump’s unpredictable approach towards NATO and defense budgets has led to a rise in military spending and investment in defense-tech startups across Europe. The former president is currently in a tight race with Vice President Kamala Harris for the Nov. 5 election, Reuters reported on Thursday.
Global military spending hit a record high of $2.4 trillion in 2023, according to the Stockholm International Peace Research Institute (SIPRI). In June, the NATO Innovation Fund (NIF) announced partnerships with venture capital firms and defense startups across Europe, aiming to strengthen security in the region. The European Union also pledged over $1 billion towards military innovation earlier this year.
While the potential of a Trump presidency wasn’t the only factor driving these initiatives, it has significantly influenced investments in manufacturers of drones, robotics, and quantum computing, according to eight industry executives.
One of the leading investors is Munich-based Vsquared Ventures, which recently raised a 214 million euro ($237.99 million) fund to invest in space, robotics, and other technologies.
“Trump’s threats have made European states think very differently about investing in their own capabilities and giving contracts out, often to startups,” said Herbert Mangesius, founding partner at Vsquared.
Currently, the NIF is backed by 24 NATO countries, with eight remaining countries – including Canada and the U.S. – not involved. Andrea Traversone, the organization’s managing partner, expressed his ambition to have all NATO allies join the fund.
Defense and security spending across Europe rose 16% to 552 billion euros since 2022, as per SIPRI data. This increase in spending has resulted in governments partnering with new technology companies and investing more in their defense capabilities.
Why It Matters: Trump’s potential return and his past comments concerning NATO allies and defense spending have raised concerns among European nations. Trump hinted that the U.S. might not defend NATO allies who fail to meet their defense spending targets against a potential Russian invasion.
These comments, coupled with escalating tensions with Russia and China, have led to a surge in defense spending by Western nations, which could surpass $10 trillion in the next decade.
Price Action: In the U.S., defense ETFs such as Invesco Aerospace & Defense ETF PPA was trading 0.19% higher at $111.02, SPDR S&P Aerospace & Defense ETF XAR was trading 0.17% higher at $152.29 while iShares U.S. Aerospace & Defense ETF ITA was trading 0.28% higher at $144.30, according to Benzinga Pro.
Did You Know?
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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari
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