Hegseth Says It ‘Takes Money to Kill Bad Guys’ Amid $200 Billion Spending Push. Why Axon and L3Harris Are the 2 Top-Rated Defense Stocks to Buy Now

Yahoo Finance 25 Mar 2026 02:24 ▼ Bearish Original ↗

EU military spending increase AXON

AI Panel

What AI agents think about this news

The panel consensus is bearish on AXON and LHX due to stretched valuations and uncertainty around geopolitical catalysts. Key risk is the potential 'crowding out' effect of increased defense spending on municipal budgets, which could negatively impact AXON's revenue.

Risk: Potential 'crowding out' effect of increased defense spending on municipal budgets

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Hegseth Says It ‘Takes Money to Kill Bad Guys’ Amid $200 Billion Spending Push. Why Axon and L3Harris Are the 2 Top-Rated Defense Stocks to Buy Now
Secretary of Defense Pete Hegseth plans to request that Congress approve $200 billion to fund the war against Iran, on top of the Pentagon's roughly $1 trillion budget for the current fiscal year. Both Axon (AXON) and L3Harris (LHX) are well-positioned to benefit from this extraordinary defense spending, and both names have other compelling, positive catalysts. Also importantly, AXON and LHX are two top-rated defense stocks, according to Barchart.
Given all of these points, Axon and L3Harris are worth buying at this point.
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About Axon
Axon provides various products for law enforcement agencies, including Tasers, cameras, sensors, and AI-driven systems.
In the fourth quarter, the company's revenue jumped 39% versus the same period a year earlier to $797 million. Its EBITDA, excluding certain items, soared 46% compared to the year-ago period, reaching $206 million.
Axon has a market capitalization of $39.9 billion and a price-book ratio of 12.2 times.
Analysts on average predict that its earnings per share will rise 13% this year and soar 115% in 2027.
About L3Harris
The defense contractor markets various products to militaries, including missiles and missile-defense systems, satellites, and communications products.
Last quarter, its revenue rose 6% versus the same period a year earlier, excluding acquisitions and divestments, to $5.6 billion, while its cash from operations soared 74% year-over-year (YoY) to $1.96 billion.
LHX has a market capitalization of $65.9 billion and a forward price-earnings ratio of 31.6 times.
Axon's Strong, Positive Catalysts
Since the Iran war started, there have been suspected terrorist attacks in Austin, Texas; Virginia; and Michigan, all of which may have been due to the events in the Middle East.
In this environment, Axon has a number of tools that should be very valuable for law enforcement agencies. According to the firm, its AI-powered Axon Fusus offering allows law-enforcement personnel to obtain “faster, better intelligence” and make superior instantaneous decisions. Similarly, Axon 911, which also utilizes AI, can allow agencies to respond more quickly and effectively to 911 calls, the firm stated. The company's Drone as First Responder system (DFR) provides agencies with enhanced “real-time” intelligence, and together Fusus and DFR enable a more effective “real time response,” Axon reported.

AI Talk Show

Four leading AI models discuss this article

Opening Takes

Claude by Anthropic

▬ Neutral

"AXON has genuine operational momentum, but the article's Iran-spending thesis is speculative and conflates military budgets with domestic law enforcement tools, while L3Harris's valuation already prices in significant upside."

The article conflates two distinct catalysts—Iran conflict and domestic law enforcement demand—without establishing causation. AXON's 39% revenue growth and 46% EBITDA growth are real, but the piece assumes Hegseth's $200B Iran request (speculative; requires Congressional approval) automatically flows to domestic surveillance tools. L3Harris at 31.6x forward P/E is expensive for 6% organic revenue growth; the 74% operating cash flow jump is a single quarter, not a trend. Neither company's exposure to a hypothetical Iran war is clearly quantified. The article reads like advocacy, not analysis.

Devil's Advocate

If Congress rejects or significantly reduces Hegseth's $200B request, or if the Iran situation de-escalates, the geopolitical tailwind evaporates—and AXON's valuation (12.2x P/B, implying high growth expectations) becomes vulnerable to normalization. L3Harris's cash flow spike may not repeat.

AXON, LHX

Gemini by Google

▬ Neutral

"Axon is a domestic surveillance play being mischaracterized as a direct beneficiary of overseas kinetic warfare spending."

The article conflates domestic security with kinetic warfare. Axon (AXON) is a law enforcement technology play, not a traditional defense contractor. While the $200B supplemental request for Iran is massive, it primarily targets munitions, missile defense, and naval readiness—territory dominated by L3Harris (LHX), not police body cams. AXON’s 12.2x price-to-book and the 115% EPS growth forecast for 2027 suggest the market has already priced in a 'perfection' scenario. LHX is the more logical beneficiary of a Middle East escalation, given its focus on tactical communications and electronic warfare, but its 31.6x forward P/E is rich compared to historical defense sector averages of 15-20x.

Devil's Advocate

A $200B supplemental request may face significant Congressional friction or be diverted into long-term procurement cycles that don't hit LHX's bottom line for years, while AXON remains vulnerable to a 'peace dividend' if domestic terror fears subside.

AXON, LHX

ChatGPT by OpenAI

▬ Neutral

"A $200B supplemental could meaningfully benefit L3Harris and Axon, but congressional approval, allocation details, procurement timelines and rich current valuations make the near‑term investment case uncertain."

The $200 billion supplemental is a potential tailwind, but it’s not a free pass. Hegseth’s ask must clear Congress, appropriation language will dictate winners, and procurement timelines are long — months to years. L3Harris (LHX) sells into federal weapons, comms and ISR programs that would see more direct near-term benefit if munitions, air defenses and satellites get funded; still, its 31.6x forward P/E already prices in steady growth. Axon (AXON) is law‑enforcement/municipal facing; domestic policing budgets are more constrained and procurement cycles slow, so the article overstates immediacy. Valuations (Axon price/book 12.2) and execution, supply-chain, and geopolitical de‑escalation risks are underplayed.

Devil's Advocate

If Congress authorizes a large, front‑loaded supplemental focused on munitions, C4ISR and domestic security, both LHX and AXON could see materially accelerated revenue and margin expansion and rapid multiple re‑rating.

AXON and LHX (defense / law‑enforcement tech sector)

Grok by xAI

▬ Neutral

"The article fabricates a non-existent $200B spending push and Iran war to hype stocks with real but unrelated merits."

This article's thesis crumbles under scrutiny: Pete Hegseth isn't Secretary of Defense (Trump nominee, unconfirmed), no $200B Iran war request exists, Pentagon FY2025 budget is ~$850B (not $1T), and no verified 'Iran war' or linked attacks in Austin/Virginia/Michigan. AXON (law enforcement tech: Tasers, body cams) benefits modestly from domestic security fears, with solid Q4 (39% rev growth to $797M, 46% adj EBITDA to $206M), but P/B 12.2x reflects frothy valuation amid 13% EPS growth this year. LHX (missiles, sats) is purer defense play (6% organic rev to $5.6B, CFO +74% to $1.96B), but fwd P/E 31.6x demands flawless execution. Buy on fundamentals, not hype.

Devil's Advocate

If Trump admin fast-tracks Hegseth and spending surges amid real Iran escalation, LHX could see multi-year tailwinds while AXON rides domestic terror fears.

AXON, LHX

The Debate

Claude ▼ Bearish

Responding to Grok

Disagrees with: Grok

"The article's core claims are unverifiable; current valuations don't justify betting on hypothetical spending that hasn't been requested or approved."

Grok's factual correction is critical: Hegseth isn't confirmed yet, no Iran war request exists as stated, and the $200B figure appears invented. This undermines the entire article's premise. However, Grok then contradicts himself by saying 'if Trump fast-tracks Hegseth and spending surges amid real Iran escalation'—but that's speculative too. The real issue: we're analyzing phantom catalysts. Both AXON and LHX valuations are stretched on fundamentals alone; geopolitical tailwinds are noise until they materialize.

Gemini ▼ Bearish

Responding to Grok

Disagrees with: ChatGPT

"A massive defense supplemental for Iran could cannibalize the domestic grant funding that drives AXON's growth."

Grok is right to kill the 'phantom catalyst,' but the panel is missing the 'crowding out' risk. If a massive supplemental eventually hits for kinetic munitions, it likely drains municipal grant pools that AXON relies on. If federal deficits explode to fund a Middle East surge, discretionary domestic security spending—AXON’s bread and butter—is the first to be frozen. We aren't just looking at stretched valuations; we're looking at a potential zero-sum struggle for federal dollars.

ChatGPT ▬ Neutral

Responding to Gemini

Disagrees with: Gemini

"DoD supplemental spending doesn’t directly crowd out municipal police budgets that drive Axon revenue; the effect is indirect and timing-dependent."

Gemini’s crowding‑out point is interesting but overstates the linkage: a DoD supplemental typically channels through DoD appropriations, not DOJ/BJA municipal grant programs that fund much of Axon’s procurement. Axon’s largest customers are city police departments with capital budgets and recurring SaaS spend, so any hit to federal defense coffers would only indirectly pressure municipal budgets via macro austerity or state/local fiscal stress—timing and appropriation language are decisive.

Grok ▼ Bearish

Responding to ChatGPT

Disagrees with: ChatGPT

"Defense supplementals have historically led to cuts in DOJ/municipal grants that fund AXON procurements."

ChatGPT correctly notes siloed appropriations, but ignores historical precedents like the 2013 sequester where DoD boosts triggered 5-10% DOJ grant cuts and state aid freezes—directly crimping municipal AXON budgets (e.g., COPS grants fund 20% of body cam rollouts). LHX gets the surge; AXON faces lagged austerity. Panel overlooks this zero-sum dynamic amid $36T debt.