Rheinmetall: The Nvidia of defence?

Key points:

• Germany’s 'whatever it takes' defence shift: Berlin has moved beyond its fiscal conservatism days, committing to sustained military spending growth in 2025 and beyond, with Rheinmetall at the center of this transformation.
• Defence supercycle and structural growth: With rising European defence budgets, NATO’s rearmament, and Rheinmetall’s expansion in high-margin ammunition and battlefield tech, the company presents one of the strongest investment cases in global defence markets.
• Key risks to watch: Despite strong tailwinds, investors should consider risks such as valuation concerns, fiscal constraints in Europe, geopolitical volatility, and the cyclical nature of government defence spending.

A new era for European defence

The global security landscape has changed dramatically over the last few years. Russia’s invasion of Ukraine has not only revived geopolitical risk in Europe but also accelerated a long-overdue rearmament cycle across NATO countries. Germany, long known for its restrained military posture, has now adopted a 'whatever it takes' approach to defence in 2025, committing to sustained investment well beyond the initial €100 billion fund.

At the center of this shift is Rheinmetall AG, Germany’s largest defence company and one of NATO’s most critical suppliers. The company has evolved from a low-profile industrial player into a strategic powerhouse, scaling production, securing long-term contracts, and expanding its footprint across Europe and beyond.

A legacy of strength: What Rheinmetall does

Founded in 1889, Rheinmetall is a German defence and automotive company with a growing reputation as one of NATO’s most critical suppliers. While it maintains a civilian business, the defence division is driving the company’s growth and valuation.

Rheinmetall is:

• the leading NATO supplier of 155mm artillery shells
• a producer of tanks, air defence systems, and autonomous military vehicles
• a growing player in electronic warfare and AI-enabled battlefield systems

In many ways, Rheinmetall today occupies a position in defence markets that is increasingly being compared to Nvidia’s dominance in AI. Both are at the heart of their respective global megatrends. Both are racing to meet demand that far exceeds prior expectations. And both are enjoying rapid revenue growth, margin expansion, and outsized investor interest.

But as compelling as the comparison may be, the differences also matter—and investors should weigh both the opportunity and the risk.

The outlook: A defence supercycle in full swing

The geopolitical environment has triggered a fundamental re-rating of defence equities, particularly in Europe. Rheinmetall is a direct beneficiary of multiple converging trends:

Soaring demand and orders

• Ammunition boom: Rheinmetall’s annual production of artillery shells has increased tenfold and is expected to reach 1.1 million rounds by 2027, up from 750,000 today.
• New facilities: The company is expanding production capabilities across Germany, Lithuania, Romania, and Ukraine to meet regional demand.
• Landmark contracts: In 2024, Rheinmetall secured an €8.5 billion artillery contract with the German government, one of the largest in its history.
• Backlog strength: The company’s order book now exceeds €30 billion, reflecting multi-year revenue visibility.

Evolving product mix

Beyond traditional hardware, Rheinmetall is investing in:

• Drone and counter-drone systems
• AI-powered battlefield software
• Mobile air defence solutions

This positions the company to benefit from both conventional rearmament and long-term defence technology transformation.

Financial performance

Rheinmetall’s financial profile supports its strong operating outlook:

• 2024 revenues grew 36%, reaching €9.75 billion. Company expects 25-30% sales growth in 2025.
• The ammunition division posted a 28.4% operating margin, significantly above industry averages.
• Rheinmetall, in its recent presentation, said that it could potentially capture 20-25% of NATO Europe’s equipment spending through to 2030. The company also sees significant opportunities to help re-arm Ukraine after a peace deal is reached.

Parallels with Nvidia

Like Nvidia in the AI space, Rheinmetall is:

• Scaling production at breakneck speed to meet surging global demand
• Benefiting from structural, long-term tailwinds (in this case, rearmament and geopolitical fragmentation)
• Enjoying a dominant market share and strong pricing power
• Attracting strong analyst upgrades and institutional investor interest

Despite the useful parallels, the Nvidia analogy has its limits, because:

• Nvidia is a tech company with high growth multiples; Rheinmetall is industrial/defence, with different risk profiles.
• Nvidia benefits from private-sector tech adoption, whereas Rheinmetall relies on government contracts.
• Defence is more politically sensitive and faces ESG headwinds.