The iShares U.S. Aerospace and Defense ETF (NYSEARCA:ITA) has climbed 13.74% year to date without owning a single share of Tesla (NASDAQ:TSLA) or any Magnificent Seven stock.
Over the same period, Tesla shares have fallen 12.51%, making ITA’s sector-focused exclusion look prescient from a pure performance standpoint.
ITA is BlackRock’s iShares fund tracking large- and small-cap U.S. companies across the aerospace and defense industry, managing $13.49 billion in net assets across 47 holdings as of March 31, 2026.
The portfolio is heavily concentrated at the top, with the ten largest positions representing roughly 64% of total assets under management.
GE Aerospace leads the fund at a 19.03% weighting, followed by RTX at 16.55% and Boeing at 8.91%, meaning those three names alone account for roughly 44.5% of the portfolio.
Other major holdings include General Dynamics at 4.77%, L3Harris at 4.66%, Lockheed Martin at 4.58%, Northrop Grumman at 4.58%, TransDigm at 4.53%, and Howmet at 4.50%.
Defense contractors have benefited from a significant expansion in federal budget authority, with the FY 2027 President’s Budget request for the Department of the Air Force alone reaching $391.1 billion.
The F-35 program alone carries a $21.4 billion request for FY 2027, while commercial aerospace has added a separate tailwind through Boeing’s production ramp and record engine-services demand at GE Aerospace and RTX.
Growth-oriented names inside the fund have amplified momentum, with Axon Enterprise at 2.83%, Rocket Lab at 2.55%, and Kratos Defense at 1.10% among the smaller but fast-moving holdings.
Goldman Sachs flagged economic security as a prominent 2026 theme, and ITA serves as a direct expression of that investment thesis across its 47 holdings.
Tesla’s absence from the fund comes down to index methodology rather than any editorial judgment, as ITA tracks a sector-specific benchmark limited to aerospace and defense classifications.
Tesla carries a $1.48 trillion market cap but is categorized under consumer discretionary and automotive, while its rocket operations reside at SpaceX, a separate private company entirely outside the index’s scope.
That structural exclusion has benefited the fund this year, as Tesla trades at a price-to-earnings ratio of 421 and is down 12.51% year to date despite a 14.14% earnings beat on $22.39 billion in Q1 revenue.
The broad tech-adjacent volatility that has weighed on Magnificent Seven names has bypassed ITA entirely, allowing the fund to post a trailing-year return of 32.48% and a trailing-month gain of 6.14%.
Investors should note the trade-off clearly: ITA’s concentration in three prime contractors creates its own risk, as a production stumble at Boeing or a Pentagon budget impasse could reverse recent gains quickly.
Over five years, ITA has returned 130.85%, and over ten years, 330.57%, periods that included defense budget contractions and pandemic-era aerospace shutdowns that weighed heavily on the sector.
For investors weighing a sector allocation, ITA provides direct exposure to a policy-driven earnings cycle without taking on high-multiple consumer technology risk, though past performance does not guarantee future results and this article does not constitute investment advice.
