Thematic Spotlight: How KDEF Fits Into 2025-2026’s Important Global Themes
Thematic investors sizing up 2025 and looking ahead to 2026 are circling a familiar set of ideas: artificial intelligence, cybersecurity, and critical minerals.
These aren’t just trends, they’re structural forces reshaping economies, industries, and national priorities.
But there’s another major theme rising alongside them, one that sits at the crossroads of technology, geopolitics, and national strategy: defense. And that’s where the Plus Korea Defense Industry Index ETF (KDEF) enters the picture.
Why Defense Is Becoming a Core Theme, Not a Side Story
Around the world, defense spending is accelerating at the fastest pace in decades. From Europe’s rearmament cycle to the Indo-Pacific’s shifting balance of power, governments are modernizing their military capabilities in ways heavily tied to technology.
South Korea has openly signaled its ambition to become the world’s fourth-largest defense power by 2030, backed by a larger-than-expected budget for defense and aerospace research, including independent development of critical technologies such as special semiconductors and AI-enhanced weapons systems. [1] That policy backdrop supports a multi-year capital investment cycle, with Korean defense firms expanding both domestic capabilities and exports.
Long considered a manufacturing powerhouse, it has rapidly emerged as a global defense exporter, supplying advanced weaponry, aerospace systems, and precision technologies to a growing list of allies.
KDEF zeroes in on this transformation, it seeks to provide targeted exposure to South Korean companies directly involved in defense manufacturing, engineering, and next-generation systems.
How KDEF Aligns With 2025–2026’s Biggest Global Themes
1. AI Meets Hardware: The Future of Defense
AI is often associated with software-first companies, but its most impactful applications may emerge in defense systems such as autonomous platforms, sensor fusion, predictive logistics, and battlefield intelligence. Korean defense firms are already integrating AI deeply into their next-generation technologies, making KDEF a complementary angle to mainstream AI exposure.
2. Cybersecurity as a National Imperative
Cyber defense isn’t just a digital issue; it’s a national security priority. Modern weapons systems, communications networks, and command-and-control infrastructures are built on secure, resilient digital backbones. Many Korean defense companies sit at the intersection of physical and cyber security, creating an overlooked but powerful thematic overlap.
3. Critical Minerals, Semiconductors, and Strategic Supply Chains
Defense production depends on secure access to advanced materials and high-end manufacturing capabilities areas where South Korea is already a global leader. From specialized metal components to mission-critical semiconductors, KDEF’s underlying companies operate within supply chains that matter not only to defense, but to the broader industrial and technological landscape of the next decade. [2]
Why Investors Are Paying Attention Now
Defense was once considered a niche theme, important, but not typically a top-tier allocation. That has changed dramatically. As governments commit to long-term modernization programs, the defense sector has stepped firmly into the global investment spotlight.
Market performance has also put defense on the thematic map. By mid-2025, defense-oriented ETFs were among the strongest-performing thematic categories, and KDEF’s segment, Korea’s defense industry, ranked as one of the standout ETF areas in the second quarter according to Zacks. [3]
For thematic investors, KDEF offers a way to access this trend through a country with advanced industrial capacity, strong export momentum, and growing international demand.
A Complement to, Not a Substitute for, Other Themes
AI, cybersecurity, and critical minerals will continue to dominate headlines. But defense ties them together. It’s where these technologies converge, where industrial strategy becomes national strategy, and where innovation moves directly from lab to real-world application.
KDEF can serve as a focused satellite position within a diversified thematic sleeve adding global context, regional diversification, and exposure to an increasingly influential geopolitical theme.
Open KDEF’s Arsenal: Take A Look At Our Holdings here.
[1] Lee, Joyce, South Korea to become 4th-largest global defense power, President Lee says, Reuters, 10/20/25.
[2] Park, Jaemin, The Development of Emerging Technologies in South Korea and Its Impact on International Relations, Korea On Point, 7/15/25.
[3] Saha, Sanghamitra, 6 Best-Performing ETF Areas of Second Quarter 2025, Nasdaq.com, 6/27/25.
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