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<\/p>\nTrend 2: The “teching up” of defense spending<\/h2>\n
The second global defense spending trend is the increasing prioritization of cutting-edge technologies, such as AI<\/a>; autonomous systems (which includes autonomous drones<\/a>); space-based systems; and cybersecurity<\/a>. (There is some overlap in these categories.)<\/p>\n This trend will naturally benefit Nvidia because its graphics processing units (GPUs) are the dominant chips by far for processing AI workloads. This includes AI training, often done in data centers, and AI inferencing, which is increasingly done “at the edge.” This means within the machine in which an AI application is deployed, such as a cellphone, a drone, or a vehicle.<\/p>\n In June, President Trump signed an executive order (EO) called “Unleashing American Drone Dominance,” aimed at speeding up U.S. drone production. There’s a section in this EO called “Delivering Drones to Our Warfighters,” which should result in increased use of drones in the military.<\/p>\n U.S. defense giant Northrop Grumman<\/strong>‘s (NOC<\/a> +0.10%<\/span>)<\/span> CEO Kathy Warden addressed the topic of autonomous systems — which includes autonomous drones — in late July on the company’s Q2 earnings call: “Our investment in Beacon [a flying-mission test bed] also supports the administration’s call for more next-generation autonomous systems.”<\/p>\n Drones for a wide variety of uses are increasingly becoming autonomous, thanks to AI. This trend could benefit Nvidia, as its Jetson embedded AI computing platform can act as the “brains” of drones and other types of robots.<\/p>\n The “teching up” of defense spending has led to a growing category of companies called “defense tech” companies. These are tech companies whose products are used in defense applications, though not necessarily exclusively.<\/p>\n In 2024, global venture capital (VC) funding for defense-related tech companies jumped 33% year over year to $31 billion, according to consulting giant McKinsey & Company. The biggest investment areas were AI ($12 billion), next-generation communication networks, and autonomous systems ($4 billion each).<\/p>\n Data source: Nvidia<\/p>\n<\/div>\n Within the “system integrators” category, Nvidia’s “U.S. Public Sector” website page lists that it’s working with four major defense contractors (Leidos<\/strong>, Lockheed Martin<\/strong>, Northrop Grumman, and RTX<\/strong>‘s Raytheon unit) and three management consulting firms that do much government work (Accenture<\/strong>, Booz Allen Hamilton, and Deloitte).<\/p>\n The website page also contains a list of “solutions providers” that Nvidia works with. These include Dell<\/strong> and Hewlett Packard Enterprise<\/strong>. Both make computer servers that integrate Nvidia chips, so they’re likely selling some of these systems to the government. The other 12 companies are privately held.<\/p>\n This doesn’t mean that all of Nvidia’s tech that’s used in defense-related applications is sold to one of the partners listed in its U.S. public sector website section. These are just the entities that it’s publicizing <\/em>that it’s directly<\/em> working with.<\/p>\n My research suggests Northrop and Nvidia have a long-standing and deep relationship. Northrop’s name came up more often in my research than did those of other large defense contractors<\/a>.<\/p>\n Here’s a part of a press release, titled “Northrop Grumman to Accelerate AI Innovation with Nvidia Software,” released in May 2024:<\/p>\n Northrop Grumman … announced today an agreement for access and use of Nvidia AI software to accelerate development of some of the most advanced systems<\/strong>.” [Emphasis mine.]<\/p>\n This industry-leading agreement … gives Northrop Grumman access to Nvidia’s extensive portfolio of AI and generative AI software, its platforms, and frameworks, including Nvidia Omniverse. [Omniverse is generally used for simulation purposes.]<\/p><\/blockquote>\n Indeed, this looks like an “industry-leading agreement,” as Northrop termed it. Not surprisingly, the release is very general. We can probably assume that many, if not most, of those “advanced systems” it mentions are defense-related.<\/p>\n In June 2025, Northrop released a press release titled “Northrop Grumman Expanding Its Use of Nvidia AI Technology to Advance Solutions for Space.” It reads in part:<\/p>\n [Northrop] is expanding its use of Nvidia technology, including adding space applications to the Nvidia Omniverse simulation platform and leveraging the Nvidia Isaac Lab framework for the training, development and deployment of artificial intelligence (AI) for cognitive spacecraft operations.<\/p><\/blockquote>\n Isaac Lab is Nvidia’s framework for robot learning. It would seem that Northrop plans to use Nvidia’s AI tech to make certain spacecraft — perhaps satellites? — autonomous.<\/p>\n Defense tech company Mercury Systems<\/strong> touts that it’s been working with Nvidia for over 20 years. Here’s a snippet from an introduction to a May 2025 Mercury video: “As a preferred partner, Mercury is bringing Nvidia’s latest GPU and artificial intelligence (AI) technologies to some of the most demanding environments on Earth and beyond, revolutionizing aerospace and defense applications by instantaneously turning data into actionable insights.”<\/p>\n Basically, what Mercury does is provide “ruggedized” versions of Nvidia’s products to the defense and aerospace industries.<\/p>\n I don’t know how long Nvidia has been involved with the defense industry, but it’s been for quite some time.<\/p>\n I found a December 2012 Nvidia press release for a contract with DARPA (the U.S. Defense Department’s research arm) that included: “Nvidia processors are used in a wide variety of embedded applications today, including automobiles made by [four higher-end auto manufacturers], aircraft including the F-22 Raptor, and U.S. Army tanks<\/strong>.” [Emphasis mine.]<\/p>\n The F-22 Raptor is a stealth fighter jet of the U.S. Air Force. In 2005, it began entering service. These aircraft are still in use, but no longer produced. Lockheed Martin and Boeing<\/strong> were the prime contractors.<\/p>\n My guess is that the F-22 and the U.S. Army tanks used Nvidia’s tech for digital instrument or related displays.<\/p>\n In my search of government public records for request for proposals (RFPs), Nvidia’s name popped up a lot. A good number of these RFPs from defense-related agencies (and other governmental agencies) included Nvidia’s GPU-equipped professional workstations and its Jetson platform. This AI-powered embedded platform is used to develop autonomous drones and other robots, and makes Nvidia one of the top robotics stocks<\/a>.<\/p>\n Here’s an example of the type of entry that Nvidia investors should love: In July, an agency that’s part of the Navy specified that it wanted to purchase perpetual licenses for 250 Nvidia RTX Workstations and five-year support service for the 250 units.<\/p>\n The agency had to justify being specific with brand and product and not open to other products: “The justification outlines … and emphasizes the urgency and uniqueness of the products<\/strong>, which are deemed essential<\/strong> for fulfilling agency needs.” [Emphases mine.]<\/p>\n This wording suggests the requesting agency does not believe this Nvidia product has any relevant competition.<\/p>\n In short, defense budgets around the world are increasing, and these budgets are increasingly prioritizing advanced technologies, including AI. Nvidia’s position as the leading maker of AI-enabling chips and platforms make it well positioned to benefit from these two secular global trends.<\/p>\n<\/div>\n ____________________________________________________<\/p>\n Beth McKenna is a contributing writer for <\/em>The Motley Fool covering stocks and ETFs across various sectors, with a focus on artificial intelligence and emerging technologies. Beth previously worked in risk management for major property and casualty insurers. She holds a Bachelor of Arts degree in Engineering from Lafayette College and completed graduate-level coursework in business at Rutgers University.<\/em><\/p>\nHigher defense spending on AI will naturally benefit Nvidia, the AI chip leader<\/h3>\n
President Trump’s “Unleashing American Drone Dominance” executive order<\/h3>\n
Venture capital is flowing into “defense tech” companies<\/h3>\n
Nvidia’s involvement in defense applications<\/h2>\n
Nvidia’s “U.S. Public Sector” partners<\/h3>\n
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<\/p>\nNvidia’s partnership with Northrop Grumman seems particularly deep<\/h3>\n
Defense tech company Mercury Systems and Nvidia have been working together for many years<\/h3>\n
Nvidia’s tech was used in military equipment (tanks, fighter jets) as far back as at least 2012<\/h3>\n
Solid government demand for Nvidia’s GPU-equipped professional workstations and Jetson platform<\/h3>\n
Nvidia’s tech considered “unique” and “essential” by a Naval agency<\/h3>\n
Increasing global defense budgets + increasing defense spending on AI = bullish for Nvidia stock<\/h2>\n