Rheinmetall, the German defence and automotive technology giant, has enjoyed a staggering 90% surge in its stock price since early March. Yet despite this dramatic rise, a cloud of scepticism still hangs over investor sentiment. The concern? Capacity constraints that could limit the company’s ability to meet rising demand as Europe retools for a new era of defence spending.

The geopolitical landscape in Europe is shifting, and so are the fiscal priorities of its governments. In response to growing global tensions and evolving security challenges, NATO countries are now openly discussing a major increase in defence budgets, with some pushing for targets as high as 5% of GDP by 2032. For Germany, that kind of commitment would translate into defence expenditures north of €200 billion — more than double its current levels.

Germany has emerged as a central figure in this rearmament narrative. Not only does it represent a significant portion of the European Union’s collective defence capability, but it has also become the most vocal about the urgency to rebuild and modernize its military infrastructure. In this context, Rheinmetall naturally becomes a focal point — a direct beneficiary of the billions set to be funneled into new equipment, technology upgrades, and logistical support.

But here’s the catch: while the broader market appears to recognize the long-term growth potential, investors are grappling with a more immediate question — can Rheinmetall actually deliver?

Scaling up in the defence sector is not as simple as flipping a switch. Expanding manufacturing, securing supply chains, and navigating bureaucratic procurement processes all take time. And with orders likely to balloon over the next few years, the worry is that Rheinmetall may hit a wall in how quickly and efficiently it can respond. This is particularly important when governments are eager for fast results in the face of rising geopolitical threats.

This tension is playing out clearly on trading desks. While there’s been a wave of profit-taking — understandable given the stock’s meteoric rise — underlying interest in Rheinmetall remains strong. Traders continue to lean toward the buy side, signalling that despite short-term doubts, there’s a belief in the company’s long-term positioning as the cornerstone of Europe’s defence resurgence.

Ultimately, Rheinmetall sits at the intersection of political will and industrial capability. As European nations increasingly commit to reshaping their defence strategies, the spotlight will remain fixed on whether this industrial giant can keep pace — not just with demand, but with expectation.