Washington just experienced a political earthquake.

Last Tuesday, Democrats swept the midterm elections, winning control of both the House and Senate. And almost immediately, Wall Street started questioning the future of America’s defense industry.

Defense stocks sold off Wednesday as investors worried that the new Congress would cut military spending, scrutinize Pentagon contracts, and derail some of President Trump’s ambitious defense plans.

But I think investors are missing the bigger picture.

China doesn’t care who controls Congress. Neither does Russia. And the next generation of warfare certainly doesn’t.

That’s why I believe one of the most powerful investment trends of the next decade will continue moving forward, regardless of what happens in Washington.

Welcome to Next-Generation Warfare Week.

The Trillion-Dollar Reality

Let’s start with a number that should get your attention.

$1.5 trillion.

That’s how much the Trump administration requested for national defense in fiscal 2027, including proposed funding through a special congressional budget process.

To put that into perspective, it’s larger than the annual economic output of most countries on Earth.

Now, will Democrats approve the entire amount? Probably not. The administration’s request is not an enacted budget, and congressional negotiations could significantly reduce the final number.

But here’s what matters.

Even a substantially smaller defense budget would still represent an extraordinary amount of money flowing into America’s military.

And much of that investment is increasingly focused on technologies that barely existed a generation ago.

Autonomous drones. Artificial intelligence. Advanced sensors. Electronic warfare. Laser weapons. Robotic vehicles.

The Pentagon isn’t simply buying more tanks and fighter jets.

It’s preparing for a completely different kind of war.

The Battlefield Has Already Changed

Look at what’s happened in Ukraine.

Small, inexpensive drones have demonstrated that a weapon costing a few thousand dollars can threaten military equipment worth millions.

That’s a fundamental shift in the economics of warfare.

And it’s forcing military planners around the world to rethink how they build, deploy, and defend their forces.

A similar transformation is happening with AI.

Imagine military systems capable of analyzing thousands of sensor readings in seconds, identifying potential threats, and helping commanders make decisions faster than their adversaries.

Or unmanned aircraft operating alongside fighter jets, extending their reach without putting another pilot in danger.

These aren’t distant science-fiction concepts.

They’re technologies being developed and tested today.

And that creates an enormous opportunity for companies supplying the next generation of military hardware and software.

Two Companies Built for the Next War

One company worth watching is AeroVironment (AVAV).

The company is known for its unmanned aircraft and Switchblade loitering munitions. As militaries increasingly embrace smaller, more flexible weapons, AeroVironment offers exposure to a very different defense market than traditional fighter jets and warships.

There’s also Leonardo DRS (DRS).

Its technologies include advanced sensors, electronic warfare, and computing systems that help military platforms detect threats and operate in increasingly complex environments.

These aren’t buy recommendations. Defense contracts can be delayed, valuations matter, and political changes can affect which programs receive funding.

But they illustrate where I believe the industry is heading.

And here’s something else to consider.

Some of the most important opportunities may not come from the companies building the weapons themselves.

They could emerge from smaller businesses developing the advanced materials and manufacturing technologies those weapons depend on.

The Arms Race Has No Term Limits

I’m not suggesting defense spending is immune to politics.

A Democratic Congress could demand greater accountability, cancel certain programs, and challenge the administration’s spending priorities. Those are legitimate risks investors need to consider.

But the long-term competition for military technological superiority isn’t going away.

And neither is the need to strengthen America’s defense manufacturing capabilities.

That’s why I’m dedicating this entire week to the next generation of warfare.

Tomorrow, we’ll look across the Atlantic, where European countries are embarking on a military spending expansion that could reshape the global defense industry.