The Shift from Valuation-Driven to Capability-Driven Investment Logic
Defence finance is entering a phase in which strategic relevance is defined less by traditional valuation metrics and more by alignment with institutional capability requirements. Across allied democracies, NATO’s updated planning cycles, EU capability priorities and new spending benchmarks are reframing defence assets as instruments of deterrence, resilience and industrial readiness rather than cyclical equities. This analysis examines how capability alignment is becoming the principal filter through which markets interpret long-horizon demand, influencing how governments direct procurement, how institutions allocate capital and how industry positions itself within an evolving strategic environment. It clarifies why contribution to mission-critical capabilities now outweighs near-term financial indicators in determining the durability and relevance of defence enterprises. For professionals navigating the defence–finance interface, the report provides a structured framework for understanding how institutional demand is consolidating into the central determinant of future market dynamics, investment logic and industrial opportunity.