The aerospace and defense sector continues attracting investor attention in 2026 as governments increase military spending, commercial aviation demand remains strong, and space-related investments accelerate globally.

For investors seeking exposure to this theme, two of the most widely followed exchange-traded funds are the iShares U.S. Aerospace & Defense ETF (NYSEARCA: ITA) and the Invesco Aerospace & Defense ETF (NYSEARCA: PPA).

While both funds provide access to many of the industry’s leading companies, they differ significantly in portfolio construction, diversification, and risk exposure. Understanding those differences can help investors determine which approach better aligns with their long-term objectives.

ITA Offers Concentrated Exposure to Industry Leaders

The iShares U.S. Aerospace & Defense ETF is designed to provide focused exposure to the largest and most established aerospace and defense companies in the United States.

The fund currently holds 49 companies, making it relatively concentrated compared to broader sector ETFs. Its largest positions include GE Aerospace, RTX Corporation, and Boeing, which collectively represent a substantial portion of the portfolio.

This concentration allows investors to benefit directly from the performance of the industry’s dominant players. If major contractors continue securing defense contracts, commercial aviation orders, and aerospace technology opportunities, ITA stands to benefit significantly.

The fund also carries a lower expense ratio of 0.38%, making it a cost-effective option for long-term investors seeking focused exposure to the sector.

Its stronger one-year performance and higher trading volume may also appeal to investors prioritizing liquidity and direct participation in leading aerospace names.

PPA Provides Broader Industry Diversification

The Invesco Aerospace & Defense ETF takes a somewhat broader approach.

Holding 61 securities, the fund distributes capital across a wider range of companies involved in aerospace, defense systems, government technology, security infrastructure, and related industrial activities.

While GE Aerospace, Boeing, and RTX remain among its largest holdings, no single company dominates the portfolio to the extent seen in ITA.

This broader allocation reduces concentration risk and provides exposure to additional companies that may benefit from defense modernization programs, satellite technology development, cybersecurity initiatives, and emerging aerospace innovations.

The fund maintains approximately 91% exposure to industrial companies and roughly 9% exposure to technology firms, creating a slightly more diversified profile across defense-related industries.

However, investors pay a higher expense ratio of 0.58% for that diversification.

Risk and Concentration Are Key Differences

The most significant distinction between the two funds is concentration.

ITA’s top holdings account for a much larger percentage of assets, meaning performance is more heavily influenced by a handful of major contractors. This structure can amplify gains when industry leaders outperform but can also increase volatility if one or two major holdings experience setbacks.

PPA spreads assets more evenly across its portfolio, reducing company-specific risk while maintaining broad exposure to the aerospace and defense theme.

For investors who believe the largest defense contractors will continue dominating industry growth, ITA may offer stronger upside potential. Those seeking broader participation across the defense ecosystem may find PPA’s diversification more appealing.

Defense Spending Trends Support Both Funds

The long-term investment case for both ETFs remains supported by several powerful macroeconomic and geopolitical trends.

Governments around the world continue increasing defense budgets amid evolving security challenges and geopolitical tensions. Military modernization programs, missile defense systems, advanced aircraft development, cybersecurity investments, and space initiatives are driving sustained demand across the sector.

At the same time, commercial aerospace activity continues recovering as global travel demand expands and airlines invest in newer, more fuel-efficient fleets.

The growing intersection between defense, artificial intelligence, autonomous systems, cybersecurity, and satellite technologies also creates new growth opportunities for many companies held within both funds.

These trends provide a supportive backdrop regardless of which ETF investors choose.

Looking Ahead

Both ITA and PPA offer compelling exposure to one of the market’s most strategically important sectors, but they serve different investor preferences.

ITA may appeal to investors seeking lower costs and concentrated exposure to industry leaders that are likely to capture a significant share of defense and aerospace spending. PPA offers broader diversification and greater exposure to the wider defense ecosystem, though at a higher expense ratio.

As defense spending, aerospace innovation, and space-related investments continue expanding globally, both funds remain positioned to benefit from long-term sector growth. The ultimate choice depends on whether investors prioritize concentrated exposure and lower costs or broader diversification across the industry’s expanding opportunity set.