The $100 Billion U.S.-Saudi Arms Deal: A Windfall for Defense Contractors or a Geopolitical Gamble?

As tensions in the Middle East escalate and U.S.-Saudi relations pivot under the Trump administration, a proposed $100 billion arms deal is poised to reshape defense spending, geopolitical alliances, and investor portfolios. The agreement, set to be finalized during President Donald Trump’s May 2025 visit to Riyadh, promises to supercharge sales for U.S. defense contractors while deepening strategic ties. But beneath the headline figure lie complex risks, historical precedents, and uneven opportunities for investors.

The Deal’s Components: Who Stands to Gain?

The arms package is designed to bolster Saudi Arabia’s military capabilities, with a focus on countering Iran and modernizing its armed forces. Key systems under discussion include:

1. Lockheed Martin (LMT): Expected to supply advanced systems like the C-130 transport aircraft, missiles, and radar technology. A February 2024 subcontract for Saudi localization of the Terminal High Altitude Area Defense (THAAD) system signals sustained collaboration.
   
   The company’s Q1 2024 financial results already highlighted localization efforts in Saudi Arabia, with THAAD component manufacturing now underway.

2. Raytheon Technologies (RTX): A $91.95 million contract awarded in March 2025 for integrating Advanced Medium-Range Air-to-Air Missile (AMRAAM) variants underscores its role in air defense upgrades. However, RTX’s recent $950 million legal settlement for bribery and defective pricing adds compliance risks.
   

   

3. Boeing (BA): Likely to contribute aircraft or logistics systems, though specifics remain unclear. The deal could offset Boeing’s struggles in commercial aviation markets.

4. General Atomics: Touted for a $20 billion drone deal involving MQ-9B SeaGuardian systems, first requested by Saudi Arabia in 2018.

Geopolitical Context: Why Now?

The deal’s timing reflects shifting U.S.-Saudi relations. After years of congressional pushback over the Yemen war and Jamal Khashoggi’s murder—a 2021 ban on offensive weapons sales was only lifted in 2024—it represents a strategic reset. Key drivers include:
- Countering China and Russia: The U.S. aims to reduce Saudi reliance on Chinese-Russian defense partnerships, such as joint drone projects.
- Energy Security: Post-Hamas attacks, Saudi Arabia’s oil leverage and stability in the Gulf are critical to global energy markets.
- Trump’s “America First” Agenda: The deal aligns with his focus on jobs—defense contractors like Lockheed and Raytheon employ over 300,000 U.S. workers.

Historical Precedents and Risks

Past U.S.-Saudi arms deals have faced scrutiny. The 2017 $110 billion MOU, negotiated by Jared Kushner, was heavily inflated: only $14.5 billion in sales materialized by 2018. Today’s deal risks similar discrepancies if Saudi Arabia balks at non-binding terms or Congress imposes conditions.

Key Risks for Investors:
1. Congressional Pushback: Lawmakers may demand transparency on Saudi human rights abuses or tie funding to curbing Chinese arms deals.
2. Execution Delays: Localization requirements and offset clauses (e.g., technology transfers) could strain U.S. firms’ margins.
3. Raytheon’s Compliance Issues: Its $950 million settlement for bribery in Qatar raises red flags about operational risks in the region.

The Bottom Line: Winners and Losers

While Lockheed Martin and General Atomics appear best positioned due to their advanced systems’ strategic value, investors should balance optimism with caution.

• Lockheed Martin (LMT): A top play, given its longstanding ties to Saudi Arabia and the THAAD’s critical role in missile defense.
• Raytheon (RTX): High upside but elevated risk due to legal baggage and reliance on FMS contracts.
• Boeing (BA): Potential benefits are overshadowed by its broader commercial aviation challenges.

Conclusion: A Double-Edged Sword

The $100 billion deal is a geopolitical win for the U.S. and Saudi Arabia, but its true impact hinges on execution. For investors, Lockheed Martin stands out as the most secure bet, backed by concrete contracts like the THAAD localization deal. Raytheon’s AMRAAM work is promising, but its legal history demands scrutiny. Meanwhile, the broader defense sector could see a boost from sustained U.S.-Saudi collaboration—if history doesn’t repeat itself.

With $100 billion at stake, the deal is a reminder that defense stocks thrive on geopolitical volatility—but only for those willing to navigate the minefield of Middle East politics.

Data as of May 2025. Past performance does not guarantee future results.