UK investors tip defence to outpace AI as top growth sector for rest of 2025
- 55% of IG UK clients included defence in their top three growth sectors vs 45% for AI
- First time defence has topped rankings, following NATO’s commitment to up military spend
- Semiconductors hold firm in third place
London, Wednesday 30th July - UK retail investors believe that defence will outperform all other sectors over the next six months, according to the latest biannual sentiment tracker from investing and trading platform IG.
It’s the first time since the survey began that defence has taken the top spot - driven by multiple catalysts that have lifted sector performance this year - while artificial intelligence (AI) has slipped into second place.
IG asked 1,800 UK investors to name the three sectors they believe will deliver the strongest growth over the next six months. Defence and military led with 55%, ahead of AI-related industries (45%) and semiconductor equipment (29%).
Six months ago, AI narrowly pipped defence to the top spot (40% vs 37%) but since then a combination of heightened geopolitical instability and commitments from NATO members to increase military spending has seen a spike in capital inflows into the defence industry. NATO’s June summit in The Hague saw members commit to raise spending to 5% of gross domestic product (GDP) by 2035.
IG Client Sentiment Tracker shows the three sectors retail investors expect to see the most growth in the next six months
| UK investors’ top three sectors now | Six months ago | 1 year ago | 18 months ago | |
| #1 | Defence and military (55%) | AI-related industries (40%) | Semiconductors equipment (36%) | Energy (28%) |
| #2 | AI-related industries (45%) | Defence and military (37%) | Technology hardware and equipment (32%) | Technology hardware and equipment (24%) |
| #3 | Semiconductors equipment (29%) | Semiconductors equipment (29%) | Software and services (27%) | Software and services (23%) |
Defence stocks across the world have soared in value in 2025. In the UK, BAE Systems (59%), Rolls Royce (68%) and Babcock (106%) have all seen significant returns year-to-date while in Europe, following Germany’s landmark reform to its debt brake in March to allow for higher defence spending, industrial tech heavyweight Rheinmetall AG’s share price has jumped by 192%. French multinational aerospace and defence corporation Thales Group is up 74% on the year.
IG’s latest survey also shows that sentiment towards the FTSE 100 is now at its strongest ever level, with 73% of IG clients saying they expect the index to make positive returns over the coming six months, up from 69% in December 2024.
Chris Beauchamp, Chief Market Analyst at IG: “While AI sentiment remains bullish, the drivers behind the defence sector are stronger than ever - and investors are clearly responding to that momentum.
“The rise of the AI industry over recent years has been extraordinary, but in 2025, cracks have started to show. April’s US tariffs exposed the sector’s fragile reliance on international supply chains, while intensifying competition from China is adding pressure.
“In contrast, defence appears to offer more certainty. Government spending commitments are increasing, and the broader geopolitical backdrop shows no sign of easing. For many investors, defence now looks like a more resilient growth story, especially as concerns about stretched tech valuations continue to grow.”
Connect with us
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Professional clients trading spread bets and CFDs can lose more than they deposit.
Options and futures are complex instruments which come with a high risk of losing money rapidly due to leverage. They’re not suitable for most investors. Before you invest, you should consider whether you understand how options and futures work, the risks of trading these instruments and whether you can afford to lose more than your original investment.
Trading stocks and shares ‘on margin’ within a US options and futures account – meaning that you only finance part of the cost of acquiring a position in a security – carries additional risks over buying securities on a fully funded basis and may result in losses exceeding your original investment. Trading on margin will also result in additional costs to you as the investor and any securities purchased using margin may be held as collateral by the lender, restricting both your rights as shareholder, and your ability to use the securities until the margin trade is closed. You should familiarise yourself with these risks before trading on margin.
The value of shares, ETFs and other ETPs bought through a share dealing account, a US options and futures account, a stocks and shares ISA or a SIPP can fall as well as rise, which could mean getting back less than you originally put in. Past performance is no guarantee of future results. Some ETPs carry additional risks depending on how they’re structured, investors should ensure they familiarise themselves with the differences before investing.
Share dealing and IG Smart Portfolio accounts provided by IG Trading and Investments Ltd, CFD accounts and US options and futures accounts are provided by IG Markets Ltd, spread betting provided by IG Index Ltd.
IG is a trading name of IG Trading and Investments Ltd (a company registered in England and Wales under number 11628764), IG Markets Ltd (a company registered in England and Wales under number 04008957) and IG Index Ltd (a company registered in England and Wales under number 01190902). Registered address at Cannon Bridge House, 25 Dowgate Hill, London EC4R 2YA. IG Markets Ltd (Register number 195355), IG Trading and Investments Ltd (Register Number 944492) and IG Index Ltd (Register number 114059) are authorised and regulated by the Financial Conduct Authority.
The information on this site isn’t directed at residents of the United States, Belgium or any particular country outside the UK and isn’t intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.