Sweden's Prime Minister Ulf Kristersson revealed that the country will acquire four French Defense and Intervention (FDI) frigates from Naval Group, a deal valued at approximately 40 billion Swedish crowns ($4.25 billion).
This investment is set to triple Sweden's air defense capacity and is seen as a pivotal move in response to the changing security dynamics following Russia's invasion of Ukraine. The first delivery of the warships is anticipated in 2030.
Following this announcement, European defense stocks experienced a notable uptick, with Sweden's Saab rising 5.3% and other German defense firms like Rheinmetall and Hensoldt seeing increases between 5% and 8%.
Analysts from Citi have recently upgraded Saab's shares to Neutral and Rheinmetall's to Buy, highlighting the expected growth in European defense spending, particularly as NATO aims to increase defense budgets from 2% to 5% of GDP by 2035. However, there are concerns regarding the high valuations of defense stocks, which have surged since the onset of the Ukraine conflict in 2022