Geopolitical Tensions Create Opportunities: Contrarian Plays in Energy, Defense, and AI Hardware

The Israel-Iran conflict has reignited geopolitical risks, destabilizing markets and creating unique opportunities for investors. With oil prices spiking, defense spending surging, and AI infrastructure demand accelerating, now is the time to reposition portfolios toward sectors poised to benefit from these shifts. Below, we dissect actionable contrarian plays in energy infrastructure, long positions in defense contractors, and undervalued AI hardware stocks—offering a roadmap to capitalize on this volatile landscape.

1. Contrarian Plays in Energy Infrastructure: Innovex International (INVX)

Why Now?
The Israel-Iran conflict has intensified demand for energy security, particularly in LNG and nuclear power. Innovex International (INVX), an engineering, procurement, and construction (EPC) firm specializing in nuclear energy and U.S. LNG exports, is a hidden gem. Despite its robust financials and strategic positioning, it trades at 7x earnings—far below peers like Fluor Corp (15x) and McDermott International (12x).

Key Catalysts:
- LNG Exports as a Geopolitical Tool: Innovex is positioned to profit from U.S. LNG exports, which act as a strategic alternative to Russian energy. Morgan Stanley estimates a $200B infrastructure investment gap by 2028.
- Nuclear Renaissance: The company supplies baseload power to tech giants' data centers, with global nuclear construction including 63 reactors, including small modular reactors (SMRs) backed by Google.
- Financial Strength: Debt-free with $68M cash and a $100M buyback program underway. Q1 2025 free cash flow hit $24M.

Risk: Execution risks in large EPC projects and regulatory delays.
Action: Accumulate shares at current undervalued levels. A move to 10x earnings could double its stock price.

2. Defense Contractors: Long Positions in Lockheed Martin (LMT) and RTX (Raytheon Technologies)

Why Now?
The Middle East's defense spending boom, driven by U.S. partnerships and fears of regional escalation, is fueling demand for military hardware.

Lockheed Martin (LMT):
- Geopolitical Exposure: A key supplier to Saudi Arabia, the largest U.S. foreign military sales customer. Shares surged 2.9% in June 杧2025 amid heightened tensions.
- Analyst Upside: Analysts project an average price target of $525.46, citing F-35 fighter jet orders and UAV programs.

RTX (Raytheon Technologies):
- Missile Systems & AI Integration: Involved in Patriot missile systems and UAE/Norway AI partnerships. Its Raytheon and Collins Aerospace divisions align with regional defense modernization.

Risk: Pentagon cuts to F-35 orders and global economic slowdowns.
Action: Consider buying dips in both stocks, leveraging geopolitical tailwinds and strong order backlogs.

3. Undervalued AI Hardware Stocks: CoreWeave (CRWV) and ServiceNow (NOW)

Why Now?
While NVIDIA and Broadcom dominate headlines, smaller players are being overlooked despite strong fundamentals.

CoreWeave (CRWV):
- AI Infrastructure Leader: Specializes in GPU-driven cloud infrastructure with 33 global data centers. Holds a $25.9B revenue backlog and a $2.5B NVIDIA equity stake.
- Growth Metrics: Q1 2025 revenue rose 420% YoY to $982M, with adjusted operating income up 550%.
- Valuation: Trades at 37.5x sales—justified by its AI-first focus and strategic partnerships.

ServiceNow (NOW):
- AI-Driven Workflows: High demand for its automation software, with subscription revenue up 19% YoY.
- Geopolitical Play: Targets federal contracts in the U.S. and Saudi Arabia's HUMAIN initiative, leveraging AI infrastructure spending.
- Valuation: 59x forward earnings, but recurring revenue models support long-term growth.

Risk: Near-term AI hardware demand volatility and high valuation multiples.
Action: CoreWeave offers a growth-at-a-reasonable-price (GARP) entry point. ServiceNow's recurring revenue model justifies its premium.

Conclusion: Strategic Repositioning Amid Geopolitical Volatility

The Israel-Iran conflict has created a perfect storm for investors: energy infrastructure firms like INVX benefit from LNG/nuclear demand, defense contractors LMT and RTX profit from regional militarization, and AI hardware plays like CRWV and NOW capitalize on Middle Eastern tech spending.

Portfolio Strategy:
- Energy: 20% allocation to Innovex (INVX) for LNG/nuclear upside.
- Defense: 25% in Lockheed (LMT) and RTX, hedged against geopolitical escalation.
- AI Hardware: 15% in CoreWeave (CRWV) and ServiceNow (NOW) for long-term AI infrastructure growth.

Avoid traditional 60/40 portfolios; instead, focus on these sectors to navigate uncertainty. Monitor oil prices, defense deal announcements, and AI chip adoption rates to time entries. While risks persist, the strategic repositioning outlined here offers asymmetric upside in a turbulent market.