The Defense ETF Showdown: ITA vs. SHLD in the Era of Global Rearmament

US vs. Global Defense Portfolios: Why SHLD is Outperforming ITA in the New Cold War

It has been roughly five years since I first began advocating for investments in the defense sector. Over this period, the performance of defense stocks can only be described as a meteoric surge. Half a decade ago, the very concept of a “Defense ETF” was niche. Investors were largely limited to the iShares U.S. Aerospace & Defense ETF (ITA), which blends military contractors with commercial aerospace, making it difficult to construct a pure-play defense portfolio.

Today, defense has emerged as one of the hottest sectors in the market. But can this momentum be sustained?

To answer this, we must examine the macro landscape through the lens of two leading defense ETFs: the traditional U.S.-centric ITA and the globally diversified, tech-forward SHLD (Global X Defense Tech ETF).

1. The Global Rearmament Supercycle and the “Domestic Weapon” Illusion

Global defense spending is accelerating at an unprecedented pace. In 2025, worldwide military expenditures increased by 2.5%, reaching a staggering $2.8 trillion, a surge heavily driven by European nations. Facing the tangible threat of the Russia-Ukraine war, NATO members are now pushing toward a consensus target of spending 5% of their GDP on defense.

Furthermore, Europe is aggressively seeking to reduce its historical reliance on the U.S. security umbrella, implementing policies that incentivize the procurement of European-made weapons and urging a shift toward sovereign defense capabilities.

However, is breaking away from U.S. weaponry to develop “domestic” systems a realistic goal?

While many nations dream of successfully developing and mass-producing their own advanced weaponry, the limitations are glaring:

• The “Economies of Scale” Trap: Modern weapons integrate the absolute bleeding edge of technology, requiring astronomical R&D capital. To recover these costs and lower the unit price of mass production, exporting is mandatory. Relying solely on domestic procurement inflates the per-unit cost to unsustainable levels, often causing projects to drift or saddle governments with crippling debt. (This is precisely why South Korea pursued joint development with Indonesia for the KF-21 fighter jet—to share costs and secure economies of scale).
• The Supply Chain Monopoly: Even if a country successfully develops the “shell” of a fighter jet or a tank, the core components remain heavily monopolized. The engines, radars, and advanced avionics are still largely dominated by U.S. defense giants. Aircraft like the FA-50 and KF-21, alongside various other global weapon systems, highlight the severe difficulty of achieving complete supply chain independence.

Paradoxically, the intense global race to develop domestic weapons often ends up boosting the profitability of U.S. defense contractors who supply the indispensable core components.

2. Head-to-Head: ITA vs. SHLD

Given this macroeconomic backdrop, the THOTH Investment KOR-US ETF Portfolio has strategically recommended the SHLD ETF over the legacy ITA ETF since SHLD’s inception. Here is the fundamental breakdown of why.

📊 Key Metrics Comparison (As of 2026)

Metric	ITA (iShares U.S. Aerospace & Defense)	SHLD (Global X Defense Tech)
Inception Date	May 1, 2006	September 11, 2023
AUM	~$15.8 Billion	~$7.4 Billion
Trading Volume	~$213.4 Million	~$129.7 Million
Geographic Exposure	100% United States	~50% US + ~50% Global Allies (Europe, South Korea, etc.)
1-Year Return	+ 61.68%	+ 77.92%
Top Holdings	GE Aerospace, RTX, Boeing, Lockheed Martin, Northrop Grumman	Lockheed Martin, RTX, General Dynamics, Rheinmetall, Palantir, Hanwha Aerospace

While ITA boasts double the AUM and trading volume as the older, more established fund, SHLD has delivered significantly higher returns since its launch.

3. Conclusion: Aligning Portfolios with Modern Warfare

The most critical divergence between these two ETFs lies in their structural identities and how they view the future battlefield.

ITA remains heavily weighted toward massive, traditional U.S. military-industrial complexes and includes significant exposure to commercial aviation giants like Boeing.

SHLD, conversely, captures the essence of modern warfare. It focuses heavily on AI and cybersecurity (e.g., Palantir) while strategically including global defense leaders that directly benefit from NATO’s rearmament and allied defense spending, such as Germany’s Rheinmetall and South Korea’s Hanwha Aerospace.

The undisputed technological dominance and proven performance of U.S. defense stocks remain highly attractive. However, as we transition from a unipolar U.S.-led order to a multipolar global arms race defined by AI and tech-centric warfare, the globally diversified and modern-warfare-focused SHLD ETF presents a compelling, high-alpha alternative for the strategic investor.

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