The end of the tank era? Bank of America abandons tank and ammunition giants, missile defense becomes a new growth point for European military industry.

Notice that, due to the Iran conflict highlighting the importance of missile systems and drones, US banks are reevaluating the "darlings" of the European defense sector. Led by analyst Benjamin Hirland, the team expressed a preference for companies that assist in manufacturing systems for detecting, tracking, and shooting down external threats, rather than tank and artillery manufacturers. In their report, they wrote that this shift is a "structural positive" for companies like BAE Systems Plc, Thales SA, Leonardo SpA, Kongsberg Gruppen ASA, and Hensoldt AG. They upgraded Hensoldt's rating from "neutral" to "buy" and raised the target prices for BAE and Kongsberg. At the same time, they lowered the target prices for German tank and ammunition giant Rheinmetall AG and gearbox manufacturer Renk AG. The valuation concerns led to a downgrade for Swedish fighter jet manufacturer Saab AB to "hold." The conflicts in the Middle East and Ukraine have further highlighted the importance of drones and artificial intelligence (AI) systems for NATO. Last Friday, Iran launched ballistic missiles towards the Diego Garcia joint British-American military base located 4000 kilometers away, posing a potential risk to major European cities. European companies in the defense and electronics sectors Hirland wrote that while the attack on the Diego Garcia base was not successful, it "underlines the urgency of EU investment in air defense systems, providing upside for fighters, missiles, radars, and advanced ground systems." He pointed out that the demand for "integrated solutions" for defense against ballistic missiles, cruise missiles, hypersonic missiles, as well as aircraft and anti-drone systems, is rapidly increasing. These companies reported that "Gulf countries have shown strong interest, and the order expectations from European governments are also rising." On Thursday, a basket of European defense stocks from Goldman Sachs fell the most by 3.2%, with a cumulative increase of approximately 12% since 2026. Following the downgrade by US banks, Saab shares fell the most by 5.8%, making it one of the worst-performing stocks. Rheinmetall fell by 3.1%, and CSG NV, another ammunition producer, also experienced a sharp decline in share price after releasing its annual performance.