In today’s geopolitical and market environment, advisors increasingly hear the same question from clients:
How do I position for defense and security without simply buying a traditional defense ETF?
It is a fair question. Historically speaking, traditional defense exposures have performed exceptionally well and have attracted significant investor interest. But the nature of defense is changing rapidly, and the most durable long-term opportunity likely will not sit in legacy defense industrials.
A major shift is underway that changes what defense investing actually means.
1. The Modern Defense Stack Is Becoming A Technology Stack
Defense is evolving away from hardware- and capital expenditure (capex)-heavy platforms like tanks, ships, and fighter jets toward agile, low-cost, data-centric networked systems.
Key building blocks include:
- Launch vehicles, satellites, and space-based intelligence
- Next generation communications
- Autonomous systems and drones
- Cybersecurity and data analytics
- AI-enabled targeting, surveillance, and logistics
- Resilient space infrastructure, such as orbital data centers
In other words, the future of defense is defined by AI and technologies that live in space and across the digital layer of the economy, shifting away from costly and delayed legacy defense manufacturing.
2. Why Space And Defense Now?
We believe space is becoming the strategic backbone of modern security.
New space systems enable:
- Intelligence and surveillance through persistent observation from orbit
- Secure communication, including in contested environments
- Navigation and positioning through resilient satellite networks
- Autonomy and drone operations powered by data connectivity and compute
- Real-time battlefield awareness enabled by AI and satellite networks
As a result, investors considering global defense modernization trends should view space infrastructure, satellite networks, and defense-enabling technologies as a long-term growth engine.
3. Why ARKX Versus A Traditional Defense ETF?
Defense ETFs typically offer exposure to large incumbents that benefit from legacy procurement cycles and defense budgets. Those firms tend to wait for clearly defined requirements and formal “programs of record” status before committing to internal research and development (R&D); in other words, they do not tend to invest ahead of time to be first to market to meet the customer’s demand. While those businesses could remain relevant, we believe investors should consider three structural issues.
1) Defense Is Modernizing Beyond Legacy Primes
The highest growth areas of defense increasingly center on autonomy, communications, sensing, and AI-enabled systems—areas not well represented in traditional defense indices.
2) Traditional Defense Exposure Is Often “Backward Looking”
Many defense ETFs are benchmark-driven and designed around archaic classifications that limit exposure to the innovation layer driving modernization.
3) The Future Of Defense Is More Software And Networks Than Hardware
The next decade of defense advantage is likely to be defined by:
- Data
- Connectivity
- AI
- Autonomy
- Space-enabled sensing and communications
ARKX is built to obtain exposure to those themes more directly.
4. Why ARKX Versus A Passive Space ETF?
If a client is bullish on space, why not simply buy a passive space ETF?
1) Many Space Indices Dilute The Theme
Some space ETFs are built using broad index rules. As a result, while they may have meaningful exposure to legacy industrials or space-adjacent companies, their positioning vis-à-vis the innovation curve is limited.
2) Passive Approaches Struggle To Identify Winners
Space innovation is early and nonlinear. The long-term winners are likely to be determined by their:
- Technology-driven cost advantages
- Superior AI
- Agile management teams and strategies
- Falling launch costs
- First-mover positioning and accelerating adoption
- Vertical integration
Active management tends to thrive in that kind of environment.
5. The ARKX Thesis
Defense Modernization Through Space Innovation
The ARK Space & Defense Innovation ETF ARKX offers a differentiated approach to the space theme.
ARKX seeks to:
- Access the space economy and its associated enabling innovation
- Capture defense modernization tailwinds through satellites, drones, communications, autonomy, and analytics
- Use active management to see through the index constituents and identify the true innovators
In the future, we believe defense advantage will be determined less by industrial output and more by software, autonomy, sensing, intelligence, and space-based systems—ARKX’s sweet spot.
6. ARKX Owns The Stock Of Companies That Traditional Defense ETFs Tend To Overlook
Defense Modernization Without Legacy Defense Concentration
ARKX targets the differentiated, innovation layer driving modern security—not legacy defense industrials.
Below are examples of differentiated ARKX holdings that either are not meaningfully weighted or are not included in traditional defense ETFs.
1) Kratos Defense & Security Solutions (KTOS)—A Leader In Defense Tech
Why We Own It
- Kratos provides unmanned autonomous drones for the US military, including the U.S. Airforce, with whom they have developed autonomous drones to fly alongside manned aircraft.
- Kratos should benefit from multiple tailwinds like the United States’ Golden Dome supplying ground communications for software-defined satellites, hypersonic testbeds, affordable target drones used to validate counter-missile systems, and numerous other low-cost solutions available today.
Why Traditional Defense ETFs Often Miss Kratos
Most defense ETFs are weighted toward large defense primes focused on exquisite, multi-year procurement programs; as a result, they miss out on agile defense firms that invest internal R&D to deliver low-cost, attritable systems better aligned with faster procurement cycles and evolving threat environments.
2) AeroVironment Inc (AVAV)—A Leader In Defense Tech
Why We Own It
- AeroVironment manufactures unmanned aerial systems (UAS) and is a leading provider of small UAS to the US Government.
- In 2025, AeroVironment acquired BlueHalo, expanding its capabilities into space and counter-UAS, positioning the company as a global defense technology leader with integrated capabilities across air, land, sea, space, and cyber.
Why Traditional Defense ETFs Often Miss Aerovironment
Most defense ETFs concentrate exposure in incumbent primes optimized for long-duration programs, overlooking nimble defense companies that self-fund innovation to field affordable, attritable capabilities designed for rapid acquisition and changing threat dynamics.
3) Rocket Lab (RKLB)—Space Infrastructure As Defense Infrastructure
Why We Own It
- Rocket Lab is building an end-to-end space platform comprising launch, satellite systems, and spacecraft components.
- Resilient communications and Intelligence, Surveillance, and Reconnaissance (ISR) capabilities depend on deploying and replenishing satellite constellations; other than SpaceX, Rocket Lab is the most active launch provider in the West.
- National security priorities and commercial space demand support long duration growth.
Why Traditional Defense ETFs Often Miss It
Most defense ETFs do not include commercial launch and space systems companies.
4) Teradyne (TER)—The Diagnostic Backbone Of Silicon Economy
Why We Own It
- For over five decades, Teradyne has delivered mission-critical test and validation solutions to military contractors, commercial manufacturers, airlines, and defense agencies worldwide.
- As semiconductor volume and complexity continue to rise across aerospace, defense, and advanced electronics, the need for rigorous, automated testing scales in parallel. The extreme conditions of space further elevate reliability requirements.
Why Traditional Defense ETFs Often Miss It
Defense ETFs prioritize the “Primes” that build platforms but often overlook the validation infrastructure required to ensure that electronic systems function under mission-critical conditions. Teradyne provides the essential testing backbone that certifies advanced semiconductor and electronic systems before deployment.
5) Trimble (TRMB)—The Application Layer Of The Space Economy
Why We Own It
- Trimble provides the integrated systems and positioning services that enable organizations to access and authenticate location data from satellites securely.
- Trimble’s high-precision modeling, workflow optimization, and site positioning tools are used across defense, aerospace, infrastructure.
Why Traditional Defense ETFs Often Miss It
Although Trimble provides crucial tools and control systems, it is not classified as a “defense” stock, because some of its revenue is diversified across construction and agriculture.
6) Advanced Micro Devices (AMD)—Compute And AI For The New Defense Advantage
Why We Own It
• AI now powers an advantage in defense.
• Real-time AI processing within and for autonomous systems requires high-performance compute.
Why Traditional Defense ETFs Often Miss It
Traditional defense ETFs emphasize literal “defense” contractors and industrial primes; in their eyes, the compute leaders essential to the defense AI ecosystem are not defense stocks.
7) Archer Aviation (ACHR)—Next Generation Mobility And Logistics Optionality
Why We Own It
- Unlike loud, fuel-heavy helicopters, Archer’s electric propulsion has a low acoustic signature, a critical tactical advantage for covert logistics and troop movement in contested zones.
- Archer partnered with Anduril Industries to co-develop hybrid-autonomous Vertical Take-Off and Landing (VTOL) aircraft, merging Archer's airframe expertise with Anduril’s Lattice AI software to meet national security needs.
- Advanced air mobility systems like electric VTOLs (eVTOLs) are significantly cheaper to operate than traditional helicopters. By eliminating expensive jet fuel and reducing mechanical complexity, Archer can offer a lower cost-per-flight-hour, enabling the military to scale aerial logistics inexpensively.
Why Traditional Defense ETFs Often Miss It
Defense ETFs rarely allocate to earlier-stage innovation companies.
Bottom Line For Investors
A simple framework:
- Defense is evolving.
- Space is becoming a strategic backbone.
- ARKX is positioned for the modernization layer of defense through innovation.
For clients who want exposure to defense modernization but prefer not to rely exclusively on legacy defense industrials, ARKX can be a compelling path to the future of security through space enabled technologies, autonomy, AI, and next generation communications.
Important Information
Investors should carefully consider the investment objectives and risks as well as charges and expenses of an ARK ETF before investing. This and other information are contained in the ARK ETFs’ prospectuses and summary prospectuses, which may be obtained by visiting www.ark-funds.com. The prospectus and summary prospectus should be read carefully before investing.
Investing in securities involves risk and there's no guarantee of principal.
Fund Risks: The principal risks of investing in ARKX: Equity Securities Risk. The value of the equity securities the Fund holds may fall due to general market and economic conditions. Foreign Securities Risk. Investments in the securities of foreign issuers involve risks beyond those associated with investments in U.S. securities. These risks are greater in emerging markets. Industrials Sector Risk. The industrials sector includes companies engaged in aerospace and defense, electrical engineering, machinery, and professional services. Companies in the industrials sector may be adversely affected by changes in government regulation, world events and economic conditions. In addition, companies in the industrials sector may be adversely affected by environmental damages, product liability claims and exchange rates. Information Technology Sector Risk. The information technology sector includes companies engaged in internet software and services, technology hardware and storage peripherals, electronic equipment instruments and components, and semiconductors and semiconductor equipment. Information technology companies face intense competition, have limited product lines, markets, financial resources or personnel, face rapid product obsolescence, are heavily dependent on intellectual property and the loss of patent, copyright and trademark protections may adversely affect the profitability of these companies.
Aerospace and Defense Company Risk. Companies in the aerospace and defense industry rely to a large extent on U.S. (and other) Government demand for their products and services and may be significantly affected by changes in government regulations and spending, as well as economic conditions, industry consolidation and other disasters. Disruptive Innovation Risk. Companies that ARK believes are capitalizing on disruptive innovation and developing technologies to displace older technologies or create new markets may not in fact do so. Companies that initially develop a novel technology may not be able to capitalize on the technology. Companies that develop disruptive technologies may face political or legal attacks from competitors, industry groups or local and national governments. These companies may also be exposed to risks applicable to sectors other than the disruptive innovation theme for which they are chosen, and the securities issued by these companies may underperform the securities of other companies that are primarily focused on a particular theme. Special Purpose Acquisition Companies (SPAC) Risk. A SPAC is a publicly traded company that raises investment capital for the purpose of acquiring or merging with an existing company. Investments in SPACs and similar entities are subject to a variety of risks beyond those associated with other equity securities. Because SPACs and similar entities do not have any operating history or ongoing business other than seeking acquisitions, the value of their securities is particularly dependent on the ability of the SPAC’s management to identify a merger target and complete an acquisition.
For other risks regarding the fund please see the prospectus. There can be no assurance that the ETF will achieve its investment objective. The ETF’s portfolio is more volatile than broad market average.
Shares of ARKX are bought and sold at market price (not NAV) and are not individually redeemed from the ETF. ETF shares may only be redeemed directly with the ETF at NAV by Authorized Participants, in very large creation units. There can be no guarantee that an active trading market for ETF shares will develop or be maintained, or that their listing will continue or remain unchanged. Buying or selling ETF shares on an exchange may require the payment of brokerage commissions and frequent trading may incur brokerage costs that detract significantly from investment returns.
Securities in the ETF’s portfolio will not match those in any index. The active ETFs are benchmark agnostic, and corresponding portfolios may have significant non-correlation to any index. Index returns are generally provided as an overall market indicator. You cannot invest directly in an index. Although reinvestment of dividend and interest payments is assumed, no expenses are netted against an index’s returns. An indication of interest in response to this advertisement will involve no obligation or commitment of any kind.
Portfolio holdings will change and should not be considered as investment advice or a recommendation to buy, sell or hold any particular security.
To view the top ten holdings for ARKX click here.
CFA– Chartered Financial Analyst (CFA Institute). CAIA– Chartered Alternative Investment Analyst. ACA - Associate Chartered Accountant (The Institute of Chartered Accountants in England & Wales). Information as of December 31, 2025.
The information herein is general in nature and should not be considered financial, legal or tax advice. An investor should consult a financial professional, an attorney or tax professional regarding the investor’s specific situation. Certain information was obtained from sources that ARK believes to be reliable; however, ARK does not guarantee the accuracy or completeness of any information obtained from any third party.
ARK Investment Management LLC is the investment adviser to the ARK ETFs.
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ARK’s statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. ARK and its clients as well as its related persons may (but do not necessarily) have financial interests in securities or issuers that are discussed. Certain of the statements contained may be statements of future expectations and other forward-looking statements that are based on ARK’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those expressed or implied in such statements.
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