Tinker Air Show 2025: A Catalyst for Aerospace Innovation and Defense Sector Opportunities

The Tinker Air Show 2025, held at Oklahoma's pivotal military logistics hub, has emerged as a barometer of global defense modernization. This year's event, featuring cutting-edge aircraft, AI-driven systems, and cybersecurity innovations, underscores a critical inflection point for aerospace and defense investors. With defense spending projected to grow at 3-5% annually through 2030, the show's displays of advanced materials, propulsion systems, and digital solutions reveal clear pathways for strategic investments. Below, we dissect the technologies on display and their implications for defense contractors, while identifying undervalued players poised to capitalize on these trends.

1. Advanced Materials: Bridging Legacy Systems and Modern Capabilities

The static display of the B-52 Stratofortress and B-1 Lancer highlights the enduring demand for materials that blend durability with weight reduction. While these Cold War-era bombers still dominate skies, their modernization relies on advanced composites and nanomaterials to extend service lifespans. Companies like Lockheed Martin (LMT) and Northrop Grumman (NOC), which manage upgrades for these aircraft, are leveraging carbon-fiber composites and additive manufacturing to reduce maintenance costs.

Investors should note that LMT's trailing P/E of 18.5 (vs. the sector average of 22) suggests undervaluation, despite its $14.3 billion backlog in defense programs.

2. Propulsion Systems: The Race for Efficiency and Nuclear Innovation

The Navy's focus on nuclear propulsion in submarines and the Air Force's reliance on advanced jet engines for the F-35 Lightning II and KC-46 tanker signal a shift toward hybrid and high-performance propulsion. General Electric (GE), a supplier of the F136 engine for the F-35, and Rolls-Royce (RR.L), which powers the KC-46, stand to benefit from a $40 billion global jet engine market. Meanwhile, the Navy's nuclear programs could boost firms like Boeing (BA), which collaborates on reactor technology for aircraft carriers.

GE's aerospace segment grew 9% in 2023, yet its stock trades at 14x earnings—below peers—due to broader conglomerate valuation drags.

3. Cybersecurity: Protecting the Supply Chain and Data Networks

The Tinker show's emphasis on cybersecurity, particularly for supply chains, reflects a growing concern over vulnerabilities in defense logistics. The 448th Supply Chain Management Wing's reliance on small businesses for cybersecurity solutions points to opportunities for niche players like Raytheon Technologies (RTX) and Mandiant (MTD), which specialize in threat detection and industrial control systems.

RTX's cybersecurity division grew 12% in 2023, yet its stock trades at 19x forward earnings—below its five-year average of 22x—despite a robust $12.7 billion in defense contracts.

4. AI and Automation: The New Edge in Maintenance and Logistics

The Oklahoma City Air Logistics Complex (OC-ALC)'s use of AI to automate maintenance tasks exemplifies the sector's digital transformation. Startups like Palantir (PLTR), which partners with the Air Force on predictive maintenance, and established firms like Boeing and Raytheon are integrating AI to reduce downtime and costs.

PLTR's R&D intensity (25% of revenue) contrasts with its undervalued stock (P/S of 3.5 vs. sector average of 5.2), offering leverage in defense AI adoption.

5. Unmanned Systems: The Rise of Kratos and Civilian Aerospace

The static display of the KRATOS XQ-58A Valkyrie, an autonomous combat drone, signals the dawn of a new era in unmanned systems. Kratos Defense & Security Solutions (KTOS), the developer of this platform, is positioned to dominate the $20 billion market for low-cost, high-speed drones. Its stock, however, remains overlooked, trading at just 5x forward revenue despite a 22% backlog growth in 2023.

Investment Thesis: Valuation Gaps and Catalysts

The Tinker Air Show 2025 reveals three key investment themes:
1. Material Science Leaders: LMT and NOC offer undervalued exposure to legacy modernization.
2. Propulsion Specialists: GE and RR.L are undervalued given their role in hybrid and nuclear systems.
3. Cybersecurity and AI: RTX, MTD, and PLTR present underappreciated growth vectors in supply chain and logistics.

Risk Factors: Geopolitical tensions and budget cuts remain risks, but sustained defense spending—driven by AI, hypersonics, and China's military expansion—should offset these concerns.

Conclusion

The Tinker Air Show 2025 is not merely a spectacle but a roadmap for investors. Companies like KTOS, PLTR, and GE are undervalued relative to their strategic importance in materials, propulsion, and digital systems. As defense modernization accelerates, these firms offer compelling entry points to capitalize on a sector that's both resilient and innovation-driven. For long-term investors, the time to act is now—before valuation gaps close.

The ITAE's 12% annualized return since 2020 vs. the S&P's 8% underscores the sector's outperformance, with further upside as innovation accelerates.

John Gapper
June 19, 2025