Defense Spending Opportunity

Scott Galloway identifies a major investment opportunity in European defense stocks based on anticipated increases in EU defense spending.

Investment Thesis: European Defense Spending Surge

• EU is expected to increase defense spending from 1-1.9% of GDP to 3% of GDP
• This represents an incremental spend of approximately $200 billion per year on defense
• This massive increase wasn't anticipated even 12-24 months ago

Key Points:

• Market Opportunity:

  • $19 trillion economy (EU) increasing defense allocation by roughly 1% of GDP
  • Creates one of the "greatest increases in unexpected increases in capex in modern history"
  • Defense stocks in Europe have already started to outperform

• Investment Approach:

  • Looking at European defense sector stocks
  • Some defense stocks have "already ripped" but opportunity may still exist
  • Example investment: Vertical Aerospace (VTOL company)
    • Currently valued at $300-400 million market cap
    • Previously traded at $4-6 billion

• Strategic Rationale:

  • EU has concluded it "can no longer count on its crazy rich uncle for military support"
  • Additional defense spending will be stimulative to European economy
  • Technology spillover will likely help the tech sector
  • Could inspire "an upward spiral in some European stocks"

• Broader Investment Strategy:

  • Part of Scott's thesis that capital will flow out of US markets into non-US markets
  • European companies are "trading at single digit PEs" while US companies like Apple trade at PE of 34-36 despite minimal growth
  • Scott is planning to be "almost entirely out of the US market within three or four months"