We recently published a list of Why These Defense Stocks Are Declining This Week. In this article, we are going to take a look at where KWESST Micro Systems Inc. (NASDAQ:KWE) stands against other defense stocks that are declining this week.

American defense stocks slumped last month after President Trump mentioned he could significantly cut defense spending in the future. He made these comments in the context of a potential future conference with China and Russia to discuss cutting defense expenditure to spend the money in other areas:

"At some point, when things settle down, I’m going to meet with China and I’m going to meet with Russia, in particular those two, and I’m going to say there’s no reason for us to be spending almost $1 trillion on the military and I’m going to say we can spend this on other things.”

READ ALSO: 11 Best American Defense Stocks to Buy Now and 13 Best Defense Stocks to Buy According to Billionaires.

The defense industry has been shaky since Trump’s return to the White House, amid mixed statements on military expenditure during his election campaign and in the early days of his second stint. The creation of the Department of Government Efficiency (DOGE), headed by Elon Musk, is also reshaping investors’ views of the industry.

On March 3, the Pentagon, working with DOGE, found some $80 million in what it deemed wasteful funding, which included funds devoted to diversity, equity and inclusion programs, and climate change research. Press Secretary Sean Parnell made the following remarks in a statement posted on X while stating these actions were ‘just the start’:

"This stuff is not a core function of our military. This is a distraction. We believe that these initial findings will probably save $80 million in wasteful spending.”

Byron Callan, managing partner at Capital Alpha Partners, believes there is a high level of uncertainty in the U.S. defense sector related to current and future programs and the likelihood of severe cuts to government workforces.

In contrast, defense stocks in Europe have rallied this year, with several armament manufacturers seeing double-digit growth, and some even reaching record highs, as governments faced pressures to increase military expenditure.

Washington has repeatedly called for Europe to spend more on defense while stressing that the US could no longer foot the bill. EU leaders met in Brussels last week to discuss the ‘ReArm Europe Plan’, which will allow the bloc to mobilize funds up to $860 million through bonds and relaxed rules on borrowing and spending.

According to a Financial Times report on February 24, shares of the six largest American defense companies had fallen 4% under Trump’s second term. Whereas, Europe’s top defense groups returned gains of around 40% during the same period.

Despite a grim outlook, Citi analyst, Jason Gursky, is urging investors that this is the right time to buy American defense stocks. Here is what he wrote in a note to clients on March 5:

“We recognize the world order is evolving under the current President, perhaps to a multi-polar one in which three countries control spheres of influence over the Americas, Europe and Asia. However, we don’t view that world to be any less dangerous or one that decreases the need to acquire the tools of deterrence.”

Let’s now head over to the list of defense stocks that are declining this week. Please note that the stocks listed are based on one week’s performance. Our analysis does not reflect the prospects of the company. Their share price could go high or low in the future, depending on the external market conditions, industry-specific challenges, and the company’s capabilities. Additional research and caution are advised before making investment decisions.

A technician running a complex system check in the quality control of a new product.

Methodology

For this article, we went through screeners to see how stocks in the aerospace and defense industry performed over the past week (March 10-14). From there, we picked the top 10 defense stocks with the highest percentage decline in share price during this period. All data is as of the close of business on Friday, March 14, 2025.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

KWESST Micro Systems Inc. (NASDAQ:KWE)

Weekly Decline: -19.76%

KWESST Micro Systems Inc. (NASDAQ:KWE) is engaged in the development of tactical systems and ammunition for military and security forces.

The company’s share price is down by nearly 50% year-to-date, as it runs against time to regain compliance with NASDAQ’s minimum bid price requirement. In November 2024, the stock exchange extended KWESST Micro Systems Inc. (NASDAQ:KWE)’s listing for another 180 days, giving the company until May 12, 2025, to regain compliance with the minimum $1 bid price per share requirement.

KWESST Micro Systems Inc. (NASDAQ:KWE) was trading at just $0.3611 per share at the close of business on Friday, March 14, after shares dropped 19.76% during the past week.

Overall, KWE ranks 1st among the defense stocks that are declining this week. While we acknowledge the potential of defense companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KWE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires

Disclosure: None. This article is originally published at Insider Monkey.