Why KWESST Micro Systems (KWE) Is Declining This Week?

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.

Defense stocks were volatile last month. Shares fell sharply on February 13 after the American president suggested his country could rapidly cut military spending in the future. Trump 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.

READ ALSO: 10 Best Gun Stocks to Buy in 2025 and 10 Best Large Cap Defense Stocks to Buy Now.

Trump has also vowed to end the tumultuous wars in the Middle East and Europe. The U.S. is actively engaging key players in the Middle East for an extension of the truce in Gaza. On February 17, American and Russian officials met in Saudi Arabia to discuss ending the Ukraine war.

Some analysts view his anti-war stance as detrimental to defense stocks. The creation of the Department of Government Efficiency (DOGE), which aims to reduce wasteful spending, cut unnecessary regulations, and restructure federal agencies, is also reshaping investors’ views of the sector.

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.

According to a Financial Times report, shares of the six largest American defense companies have fallen 4% since Trump’s return to the White House. In contrast, Europe’s top defense stocks have risen by nearly 40% over the same period. While the performance of the U.S. defense sector was lagging behind Europe and Asia well before the presidential elections, the gap has widened after Trump’s victory.

Globally, defense stocks have rallied over the past two weeks as European governments faced pressures to increase military expenditure. The momentum has further picked up after a conservative victory in Germany, signaling the shift to the right in Berlin. According to a Bloomberg report, Friedrich Merz, the country’s chancellor-in-waiting, has already opened talks between the Christian Democrats and Social Democrats over a $210 billion emergency defense fund.

While some US defense stocks have benefited from the wave, there are several that have missed out and continue to slide.

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.