44% Pentagon Budget Hike Spurs Lockheed Pullback; Rare Earth Shortage Threatens F-35
Republican pushback on a proposed $1.5 trillion Pentagon budget, a 44% increase, spurs uncertainty for munitions funding and underpins a pullback in Lockheed Martin shares. China’s over-90% grip on heavy rare earth alloy output and an upcoming DFARS ban on Chinese materials threaten F-35 production without domestic suppliers by January 2027.
1. Legislative Pushback on Pentagon Budget
Several Republican lawmakers have signaled resistance to the $1.5 trillion defense proposal—a 44% increase over current levels—citing cost-of-living pressures and limited clarity on allocations such as the $54.6 billion for the Defense Autonomous Warfare Group.
2. Market Reaction and Share Performance
Since early March, Lockheed Martin shares have pulled back notably, erasing a significant portion of their market value even as the S&P 500 has risen roughly 3.6%, reflecting investor concern over the likelihood and scale of any final spending package.
3. Rare Earth Supply Chain Risk
China controls over 90% of heavy rare earth alloy production, and new DFARS rules banning Chinese-origin materials in U.S. defense systems by January 1, 2027, pose a critical threat to F-35 production if domestic suppliers like REalloys fail to scale capacity in time.