NATO’s 5% Pledge Ignites Defense Boom

NATO leaders have agreed to raise defense spending to 5% of GDP by 2035 — more than doubling the current 2% target. It’s the largest increase in alliance history and a win for President Trump, who’s long pushed European allies to spend more on defense.

European defense stocks surged on the announcement:

NATO members will be expected to spend 3.5% of their GDP on core defense (troops, weapons) and 1.5% on security infrastructure (cybersecurity, energy, pipelines, ports).

Hitting the 5% target will require $1.9 trillion in additional annual spending across NATO — a windfall that’s fueling growth for American defense contractors, too.

To secure business and align with Europe’s push for local production, U.S. firms are forming joint ventures and co-production partnerships across the region. 

We are a competitive species. From the beginning of time, people have used violence to gain more than their fair share. The U.S. is 4% of the world’s population but controls 34% of its wealth — and that’s not just from innovation, it’s because we’ve been willing to deploy violence to protect our shores or replace dictators such that we can grab their oil. 

We can still advocate for peace, but that only works if we start from a position of strength. That’s why military alliances like NATO exist — because the moment a stronger army believes it can take something by force, it usually does.

You don’t have to like that. I don’t. But it’s reality. No nation in history has maintained prosperity without the power to defend — and sometimes, attack. That’s why we spend $824 billion annually on defense. Is it wasteful? At times. But it’s the price of being the most prosperous nation on Earth.

Defense used to be this sort of old, kind of stuffy industry dominated by the same legacy giants: Lockheed Martin, Northrop Grumman, Boeing.

Defense is being rebranded as a growth industry. There’s more conflict, more government money, and suddenly more upside. CNBC’s disruptor list ranks all of the hot new companies. Last year, OpenAI was No. 1. This year, it’s Anduril. Palantir has been on a tear. This is becoming more of a tech industry.

I’m uneasy with what that means. Silicon Valley — a place built on “move fast and break things” — is now being incentivized by government money and private capital to build weapons. 

I’d rather live in a world where investors are more interested in funding products and services that promote peace. I believe that if most people had their basic needs met, there’d be far less incentive to kill people.

The U.S. is building its first new nuclear power plant in over a decade. The reactor, announced this week by New York Gov. Kathy Hochul, will add at least one gigawatt (GW) of capacity — enough to power a million homes. Without it, the state could face rolling blackouts.

This is the latest in a wave of nuclear momentum. Meta recently signed a multibillion-dollar deal with Constellation Energy to power its AI infrastructure with nuclear. Amazon inked a similar deal with Talen Energy, and Microsoft is backing the reopening of Three Mile Island.

Nuclear energy stocks have surged:

Why now? AI is devouring power. By the end of 2025, global AI systems are projected to consume 23 GW of electricity worldwide — twice the total annual power use of the Netherlands.

There’s geopolitical urgency, too: Over the past decade, China has nearly tripled its nuclear capacity, while America’s has declined. With electricity demand expected to more than double by 2050, failure to scale fast enough could threaten both energy security and global competitiveness in AI.

The problem? Nuclear construction in the U.S. has been plagued by “negative learning” — projects get more expensive and slower over time, despite technological advances. Red tape is a major culprit. A 1980 study found that tighter regulation between the late 1960s and mid-1970s drove a 176% increase in plant cost. 

Timelines have ballooned: In the 1960s, a plant could be built in four years. By the mid-1970s, most took 10 to 15 years. Georgia’s Vogtle plant, the only new U.S. nuclear project in the last 30 years, took over 14 years and ran $21 billion over budget.

Momentum is finally building to fix this. In May, Trump signed executive orders to fast-track permits for new and existing plants, with the goal of quadrupling U.S. nuclear capacity by 2050.

Last year, we predicted that nuclear would be the energy of 2025. It creates high-wage, shovel-ready jobs, it’s scalable, and it’s critical as AI power demands explode.  

The problem is, nuclear has been one of the worst-managed brands in modern history. Thanks to The China Syndrome and Silkwood, the public sees it as dangerous and dirty, when the reality is that’s just not true. My favorite bumper sticker is: “More people have died in Ted Kennedy’s car than in a nuclear power plant.”

To really understand the stakes here, you have to look at China. Its energy buildout is staggering. It’s approved at least 10 new nuclear reactors this year alone — the fourth year in a row — and now have 30 under construction, which accounts for nearly half of all global projects. That should be setting off alarms. One of the most fundamental signals of long-term prosperity is energy capacity, and the U.S. is falling behind fast.

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The first half of 2025 has been politically volatile and geopolitically tense, but you wouldn’t know it from the equity markets. Since bottoming out on April 8, the S&P 500 has surged 24% to hit a record high.

Zooming out, however, broader economic indicators look more fragile:

A recent survey of institutional investors from Bank of America confirmed baseline uncertainty in the U.S. markets:

What to watch in the second half of the year:

I definitely did not expect we’d be back at record highs just six months in. I thought Trump’s tariff policy alone would leave a lasting mark. But the truth is, we probably overestimate the impact the Trump administration — or any administration — has on the stock market. The gears just grind on. 

But here’s the part that bothers me: We’re measuring the wrong things altogether. Meta’s stock is up 25%, but it laid off 3,600 people. That’s 3,600 fewer households making a great living — and somehow we call that progress. Teen suicide is up 62% over the last decade, and we still obsess over whether Nvidia is selling more GPUs. We’re studying for the wrong test. We’re fixated on garden yields while the house is on fire. 

But I’ll tell you what gave me hope: the New York mayoral race. A lot of the people I hang out with gave a ton of money to Andrew Cuomo, and young people and their command of technology and dedication to a charismatic candidate, Zohran Mamdani, just rolled over them. I love that. They’re saying: The system that made you rich doesn’t work for us. So even if some of Mamdani’s policies make no f*cking sense, it’s time. Tomorrow belongs to them.

Tesla’s robotaxi launched two weekends ago in Austin … sort of. Between 10 and 20 vehicles hit the roads, but the rollout came with several major caveats:

The rollout also soft-launched a new robotaxi logo. We asked our resident design expert, Katherine Dillon, Prof G Media’s executive producer and associate arts professor at NYU Tisch, for her take.

A good logo or any visual branding typically has a few core characteristics:
It is Distinctive, Memorable, Appropriate, Practical, and often Clever.

This one is distinctive and memorable, but it falls short on appropriate. The graffiti-like treatment signals hipness and edge, which might work for a skateboard brand — but not a self-driving car. Part of the logo’s job here is to communicate safety and credibility. This one doesn’t suggest either.

So, what does communicate safety and reliability?

One example is the Prudential Insurance logo. “The Rock” (inspired by the Rock of Gibraltar) is an apt metaphor for stability, protection, and resilience, which aligns appropriately with Prudential’s core values.

The classic, most successful brand identities are Nike and Apple, with McDonald’s, Target, and FedEx as strong runners-up. I run an exercise in my class where I ask students to draw three logos from memory. Ninety percent include Nike and Apple in their set, and they’re able to draw both with near-perfect accuracy, which is a true testament to their success.

Defense stocks are just getting started in both Europe and the U.S. As spending ramps up, any competent aerospace, defense, or defense-adjacent company is likely to see massive demand. It’s going to be like selling that reflective glass to Neom: If you make it, they’ll take all of it.

Scott weighs in on how to grow in marketing without going back to school, and what right-wing podcasts get right. Listen here.