Zhitong Finance learned that JPMorgan Analyst stated that as the Trump administration's Office of Management and Budget (DOGE) seeks to reduce the deficit, Aerospace & Defense companies will face greater federal budget cut risks next year. They have lowered their estimated valuation multiples for companies such as Lockheed Martin (LMT.US), RTX Corp (RTX.US), Northrop Grumman (NOC.US), and General Dynamics (GD.US) to reflect these risks. Morgan Stanley has revised down these companies' price targets for 2025.

Morgan Stanley analyst Seth Seifman stated: "We believe that the upcoming US election will bring some potential disadvantages to defense stocks, including a hawkish fiscal stance from the USA Office of Management and Budget (OMB), which may reduce support for Ukraine, as well as from the USA Department of Defense. However, due to some congressional support for increased budgets and a challenging global threat environment, the outlook is not entirely pessimistic."

JPMorgan believes that vendors providing Information Technology Services to the government also face similar challenges. The firm has lowered the PE expectations for companies including Booz Allen Hamilton (BAH.US), CACI International (CACI.US), and Leidos (LDOS.US). Seifman said: "What DOGE will do is still unclear, but we can consider how service contractors can facilitate its efforts. Nonetheless, some incremental risks still exist."