Defence 2.0: A Smarter Way to Invest in the Future of Global Security

Defence technology is one of the hottest investment themes of 2025. This article explores how investors can gain exposure to defence through tech-focused strategies, particularly those reflecting the rise of autonomous systems, drones, and cybersecurity. Highlighting two of ARK’s ETFs—the ARK Artificial Intelligence & Robotics UCITS ETF and the Rize Cybersecurity & Data Privacy UCITS ETF—this article explores meaningful opportunities for achieving exposure to defence strategies. 

Defence Has Been A Popular Theme In 2025

During the first half of 2025, Global Defence and European Defence UCITS ETFs have attracted more than $4.8 billion and $3.1 billion in net inflows respectively, making them the two leading themes for net new assets across European thematic ETFs, as shown below.

European Thematic UCITS ETF Flows – H1 2025

Importantly, emerging defence systems providers are beginning to give traditional defence companies a run for their money. Traditional defence providers like Lockheed Martin and BAE focus primarily on manufacturing weapons systems, military vehicles, and related hardware. Geopolitical tensions, changing national security priorities, and increased procurement budgets globally have benefitted those arms makers. Simultaneously, however, ESG restrictions have prohibited many European investors from participating, and recent market runs have raised concerns about their stretched valuations.

Fortunately, investors have meaningful opportunities to access defence via allocations to innovative technologies that are closely intertwined with the up-and-coming defence players. These emerging companies benefit from the same tailwinds as traditional defence providers, yet they do not run afoul of ESG restrictions related to arms makers.

Gaining Defence Exposure Through Technology

The ARK Artificial Intelligence & Robotics UCITS ETF (“ARKI”) and the Rize Cybersecurity & Data Privacy ETF (“CYBR”) focus on defence through technology.

These funds invest in innovative tech players from drones to software and cyber defence, offering an alternative way to attain exposure to defence without owning arms makers such like Rheinmetall, BAE Systems, or Lockheed Martin.

Crucially, the same forces driving the valuations of traditional defence stocks—geopolitical tensions, changing national security priorities, and increased procurement budgets—are fuelling demand for these next-generation defence technologies.

Let’s consider these two investment strategies, in turn:

Solution 1: ARKI – Drones, A.I. And The New Defence Industry

The ARK Artificial Intelligence & Robotics UCITS ETF (“ARKI”) is an actively managed ETF that invests in companies involved in artificial intelligence, autonomous systems, and robotics.

Robotics and AI are vital for the newest uncrewed aerial vehicles, defence analytics, and automation. ARKI’s focus on these technologies makes it an alternative defence play that can benefit from defence modernisation trends while not holding traditional “defence” stocks.

Consider some of ARKI’s core holdings, which blend tech and defence:

• Palantir Technologies (PLTR): A leading AI and automation platform used by governments and enterprises to build custom software applications. Palantir’s platforms help military and intelligence agencies sift through data from disparate sources and gain insights. Palantir’s software, for example, helps the U.S. Army—including forming the basis of their widely successful MAVEN targeting software—leverage AI to make decisions across multiple domains more quickly and more precisely. This kind of AI-driven intelligence is as crucial to modern defence as any hardware.
• Kratos Defence & Security Solutions (KTOS): A smaller defence tech firm specializing in unmanned systems. Kratos is known for developing the XQ-58 Valkyrie drone, a collaborative combat aircraft built for the U.S. Air Force’s next-gen programs.
• AeroVironment (AVAV): A company that designs small unmanned aerial vehicles and loitering munitions. AeroVironment is one of the top suppliers of small drones to the U.S. military, including the hand-launched Raven and the backpackable Switchblade drone. These lightweight drones show how robotics are redefining defence.

Put simply, ARKI provides investors exposure to firms driving the “tech upgrade” of defence—a more diversified, future-facing take on defence.

Solution 2: CYBR – Securing The Digital Frontline

Whereas ARKI provides exposure to companies whose products excel through their integration of artificial intelligence, the Rize Cybersecurity & Data Privacy ETF (“CYBR”) provides exposure to companies engaged in defence against cyber threats. Relevant to ordinary consumers, companies, and the military, cybersecurity companies provide products that defend against data breaches, ransomware attacks, identity theft , and other cyberattacks.

Consider some of CYBR’s core holdings:

• CrowdStrike (CRWD): A pioneer in cloud-based endpoint security, CrowdStrike’s intelligence-led threat hunting team, Falcon Adversary OverWatch, helped a major pharmaceutical company defend against a sophisticated cross-domain attack. The adversary compromised identities, infiltrated the cloud control plane, and moved laterally across endpoints and cloud environments. By applying real‑time threat intelligence and correlating telemetry across identity, endpoint, and cloud domains, CrowdStrike detected the intrusion early, alerting and guiding the customer in neutralizing the breach before critical data were exfiltrated.¹
• Cloudflare (NET): The company works quietly to protect a huge portion of the internet, its global network blocking millions of malicious attacks on websites to keep internet traffic flowing. In 2024, for example, Cloudflare’s systems mitigated more than 21 million DDoS cyberattacks aimed at websites—a 53% jump from the prior year.²

By investing in CYBR, investors can access the companies that are defending against malicious attacks across the digital realm, from corporate data centres to personal laptop.

Combining CYBR And ARKI For Exposure To Defence

Both ARKI and CYBR give investors the ability to attain exposure to contemporary, tech-forward global defence. For investors concerned about ESG constraints, both funds comply with SFDR Article 8: an investor who cannot buy shares of arms makers like Lockheed Martin or BAE can still invest in defence through these tech-oriented names, which have and focus instead on focus is on innovation in artificial intelligence and cybersecurity.

Conclusion

As defence priorities evolve in the digital age, investors needn’t rely solely on traditional arms manufacturers to gain exposure to defence. Funds like ARKI and CYBR offer a brave-new-world, ESG-aligned alternative, capturing the rise of military AI, robotics, and cybersecurity. For those seeking EGS-responsive defence exposure, digital technologies are the next front line.