With defense budgets expanding sharply across the United States and Europe, the Invesco Aerospace and Defense ETF (NYSEARCA: PPA) has emerged as a popular single-trade option for investors seeking sector exposure.
PPA holds 63 stocks spanning aerospace, defense, homeland security, and related technologies, giving it the appearance of a broadly diversified fund across the entire industry.
However, the portfolio is considerably more concentrated than that headline number implies, with the top four holdings accounting for roughly 30% of total fund assets.
As of September 18, 2026, RTX represented approximately 8.35% of the portfolio, followed by GE Aerospace at 6.91%, Boeing at 6.88%, and Lockheed Martin at 6.66%.
General Dynamics and Northrop Grumman add another 9.94%, meaning the top six positions collectively represent nearly $38,740 of every hypothetical $100,000 invested in the fund.
The investment thesis behind PPA rests primarily on the structural shift in government spending, where major defense contracts typically stretch across decades rather than single budget cycles.
The 2025 reconciliation legislation provided the Department of Defense with approximately $156 billion in additional mandatory defense funding available through September 2029, reinforcing the long-term spending backdrop.
The Pentagon’s fiscal 2026 plans included approximately $384 billion for acquisition spending, covering procurement, research, and development across a wide range of military programs.
The trend extends well beyond American borders, as NATO members agreed in 2025 to work toward spending 5% of GDP annually on defense and defense-related priorities by 2035.
European NATO members and Canada had already increased combined defense expenditures by nearly 20% in real terms during 2025, adding another layer of demand for the contractors PPA holds.
For defense companies, those commitments translate into potential years of orders covering aircraft, missiles, ammunition, ships, drones, communications equipment, and other weapons systems.
The exposure within PPA’s largest holdings is not uniform, since Lockheed Martin is heavily tied to military programs such as the F-35, while RTX combines major defense operations with commercial aerospace businesses.
Boeing similarly brings both defense and commercial aviation exposure, while GE Aerospace is primarily an aircraft-engine business rather than a pure defense contractor.
Roughly 87% of the portfolio currently falls within industrials, with another 8% in information technology, and smaller positions include newer names such as Palantir and Rocket Lab alongside established contractors.
PPA charges an expense ratio of 0.58%, equivalent to approximately $580 annually on a $100,000 investment, with the fund managing approximately $7.62 billion in total assets.
The fund dates back to 2005, making it a well-established vehicle for the theme, though longevity does not insulate investors from the risks that come with concentrated sector exposure.
Rising government spending does not automatically translate into rising share prices, as defense programs can be delayed or canceled, contractors can experience cost overruns, and valuations still matter significantly.
Boeing has returned -5.39% over the last five years, illustrating that commercial aerospace exposure introduces additional risk for some of PPA’s largest holdings.
Recent performance reflects those pressures, with PPA closing September 18 at $159.78, well below its 52-week high above $186, and down roughly 11% over the prior month.
Year-to-date returns remain only slightly positive at approximately 2%, a meaningful retreat after the fund’s strong multiyear performance driven by the global defense spending surge.
PPA ultimately gives investors a straightforward way to bet that aerospace and defense spending will remain structurally elevated, though nearly $29 of every $100 invested flows directly into just four companies.
