UK retail investors tip defence above AI to drive returns in 2026

London, Monday 29 December - UK retail investors are tipping defence as the biggest growth sector in the first half of 2026, according to the latest biannual sentiment tracker from investing and trading platform IG.

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 41% including this sector in their top three, ahead of AI-related industries (39%) and semiconductor equipment (28%). It is the second consecutive survey where defence has topped the list among UK investors. 

The prediction from IG’s UK clients comes amid continued geopolitical instability, a lack of clear progress on a Ukraine-Russia peace agreement and increased NATO spending commitments, with member states pledging to meet 5% of GDP in defence spending by 2035, a vast increase on the previous 2% commitments. 

While AI retains second place for growth expectations, the proportion of investors backing this sector has fallen to its lowest level in 18 months, reflecting heightened fears around lofty tech valuations and an AI bubble. 

IG Client Sentiment Tracker shows the three sectors retail investors expect to see the most growth in the next six months

*the percentage of investors who included the sector in their top three picks for high growth over the next six months.

Defence stocks have soared in value in 2025. In the UK, Babcock International (148%), Rolls Royce (97%) and BAE Systems (49%) have all seen stellar returns so far in 2025, with Rolls-Royce also breaking into the top 5 most held stocks on the IG platform ahead of Magnificent Seven darlings Apple and Microsoft. 

Axel Rudolph, Senior Technical Analyst at IG: “While AI as an investment mega-trend is clearly not going away, investors have been bombarded with warnings from experts on bubble risks. Meanwhile, defence spending across global leaders currently looks like a more assured source of investment returns.” 

“With heightened geopolitical uncertainty, NATO members’ commitments to defence spending and a lack of progress on the Ukraine peace process, this trend towards defence looks set in stone. Retail investors appear reassured that capital expenditure in the defence sector is underwritten by strong demand, while there continues to be uncertainty around the long-term profitability of AI investment.”

ENDS 

 

Notes to editors

The IG Group Client Sentiment Study is a bi-annual study to understand clients’ sentiment, confidence, concerns as well as outlook on their financial goals, ambitions, financial markets, portfolio performance and future trading intentions.

Survey fieldwork dates: 3rd December – 18th December 2025

Methodology: 10–12 minute online survey sent to active IG retail clients on a 6 monthly basis to track investor sentiment. This tracker launched in January 2022.

Sample: IG clients that placed a trade in the last 6 months – the survey was sent to active leverage and share dealing clients – the results are split based on their preferred account.

Survey Base Sizes: Total sample June ’25 wave – c. 1,800 UK Clients

UK defence stock price data was recorded on 22.12.2025.

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