SpaceX Maybe Largest US IPO, Iran War Reveals Gaps In Defense Spending | Bloomberg Deals 3/25/2026
Speakers
Summary
- Advent International plans to invest up to $1 billion to fund and mature next-generation defense technology companies, aiming to close strategic capability gaps exposed by modern warfare.
- A key investment thesis is closing the cost asymmetry in drone warfare, where adversaries use cheap drones countered by multi-million dollar interceptors; the goal is to develop lower-cost autonomous systems and munitions.
- Critical gaps and opportunities exist in the defense industrial base supply chain, particularly for rare earth minerals, motors, electronics, and lower-tier manufacturing capacity, which are largely dependent on foreign sources like China.
- The U.S. defense budget is at a ~70-year low as a percentage of GDP (~3.5%), creating urgency for more efficient, cheaper, and faster capability development amidst a shift to great power competition.
- The defense valuation paradigm has fractured: large caps trade mid-teens EBITDA, mid-cap suppliers trade high-20s/low-30s, while high-growth (20-30%) defense tech and space companies command premium multiples, fueling a robust IPO pipeline.
- Despite market volatility, the M&A pipeline is robust, especially for large (>$5B) transactions, driven by corporate repositioning needs post-COVID; private equity activity is down over 20% as sponsors wait for more attractive valuations.
- Energy M&A is navigating high volatility, with cash deals for upstream assets paused until price clarity emerges; a structurally higher oil price environment and a more deal-friendly regulatory stance would accelerate consolidation.
- The SpaceX IPO is reportedly targeting a $75B raise at a valuation that could approach $2 trillion, driven by immense capital needs, particularly for its data center business model.
- There is a notable lack of AI expertise in corporate boardrooms, creating a strategic challenge for CEOs and boards planning for AI's existential impact on their businesses.
- Private credit remains a viable financing path, with substantial capital seeking opportunities, though redemptions and market conditions may cause the specific vehicles for capital to ebb and flow.
Trade Ideas
The current defense "space access" problem highlights massive work needed to rebuild supply chains; the U.S. does not manufacture key components like drone motors domestically, and critical materials (copper, steel, magnets) largely run through China. To produce low-cost, scalable systems and iterate quickly, the domestic industrial base for manufacturing, electronics, and engineering talent must be rebuilt. Founders are now moving "down the stack" to solve these foundational industrial problems. LONG on opportunities in real manufacturing companies and supply chain solutions that build resilience and enable scalable, cost-reciprocal defense production. Requires complex alignment between private companies and federal, state, and local governments for permits, land, and power to build physical factories and projects.
The current defense "space access" problem highlights massive work needed to rebuild supply chains; the U.S. does not manufacture key components like drone motors domestically, and critical materials (copper, steel, magnets) largely run through China. To produce low-cost, scalable systems and iterate quickly, the domestic industrial base for manufacturing, electronics, and engineering talent must be rebuilt. Founders are now moving "down the stack" to solve these foundational industrial problems. LONG on opportunities in real manufacturing companies and supply chain solutions that build resilience and enable scalable, cost-reciprocal defense production. Requires complex alignment between private companies and federal, state, and local governments for permits, land, and power to build physical factories and projects.
80-90% of rare earth minerals used in U.S. defense products are sourced overseas, creating a major supply chain gap. Public-private partnerships are crucial to developing solutions and bringing processing capability back to the U.S. Deals like MP Materials' acquisition of a rare earths facility are examples of bespoke solutions developed by locking arms with government, industry, and finance. This is a critical part of securing the defense industrial base. LONG on opportunities in rare earth mineral processing and securing critical material supply chains essential for defense and technology manufacturing. Developing domestic processing capability is capital-intensive and requires sustained, coordinated effort between the public and private sectors.
A more deal-friendly regulatory environment under the current administration is friendlier toward large-scale energy infrastructure development and M&A consolidation, with less "sincere cynicism about scale" compared to the prior administration. This shift reduces a major headwind for energy deals. Combined with long-term macros favoring consolidation and the potential for a structurally higher oil price environment if the Iran conflict resolves, the conditions for energy M&A are improving. LONG on the energy sector for M&A and project development, as regulatory easing unlocks deal flow and capital deployment for pipelines and consolidation. Prolonged oil price volatility or a re-escalation of geopolitical conflict could freeze deal activity despite a favorable regulatory backdrop.
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This Bloomberg Markets video, published March 25, 2026, features Shonnel Malani, Erin Price-Wright, Mark Marengo, Lande Spottswood discussing ITA, XLI, XLB, XLE. 4 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Shonnel Malani, Erin Price-Wright, Mark Marengo, Lande Spottswood · Tickers: ITA, XLI, XLB, XLE