A Citrini Research report points out that while the market has been trading on "increased defense budgets" for the past few years, the real focus now is on "who has the capacity to produce missiles after their stockpiles are depleted." In other words, Citrini believes the logic of defense investment is undergoing a second phase of change:
Phase 1: Deteriorating geopolitics → Increased defense budget → Rising defense stocks;
Phase 2: Real warfare consumes large quantities of weapons → Decreased missile/interceptor stockpiles → Insufficient existing capacity → Government must expand capacity in the long term → Defense supply chain enters a multi-year capital expenditure cycle.
War has proven that the US's existing missile and interceptor stockpiles are insufficient. High-end air defense interceptor systems such as Patriot and THAAD are particularly scarce. Therefore, the core of the next US defense cycle is no longer just "increasing the budget," but "expanding capacity." This capacity expansion will transmit upstream, driving the missile, engine, guidance, radar, electronic warfare, satellite, ISR, and anti-drone supply chains. Therefore, Citrini believes that "missile replenishment" may become a multi-year defense capital expenditure cycle, rather than a one-off war-driven boom.
