Defense executives worry Trump’s proposed military splurge could backfire

• In today’s CEO Daily: Diane Brady checks in with defense leaders about the military spending hike Trump has requested.
• The big leadership story: The fallout from the Iran conflict is still taking shape.
• The markets: Mostly up as investors digest Strait of Hormuz uncertainty.
• Plus: All the news and watercooler chat from Fortune.

Good morning. I’ve been calling defense contractors, consultants and people who work or have worked in the military this week to get reaction to Trump increasing military spending by more than 40% in his proposed 2027 budget. I didn’t expect them to speak on the record: Who wants to gloat about good fortune when the nation is at war?

What I didn’t anticipate was the pessimism and concern. Coming from four top executives whose companies stand to gain the most from federal spending, it’s a window into deeper concerns about the economy. The optimism about AI-enabled productivity gains is real, as is the support for the president’s priorities when it comes to innovation and strengthening America’s military. The concerns:

Is this level of spending sustainable? My colleague Shawn Tully argues that it is not: “If the expenditures blowout happens, and the rosy assumptions needed to offset the new outlays fail to materialize, America will edge even closer to a fiscal cataclysm prompted by a ruinous rise in interest expense.” With a $39 trillion national debt and public opposition to the attacks on Iran, opposition could come from several fronts: “We’re in a volatile and dangerous time right now,” one executive told me on Monday, prior to the ceasefire. “You need stable commitments, a stable economy with sustainable growth, to invest at this scale.”

Are these priorities strategic? Like CEOs in other industries, those working in defense have fallen in and out of favor in this administration. There were the budget cuts that forced leaders like Booz Allen Hamilton CEO Horacio Rozanski to lay off staff, the relationships damaged by DOGE, the attacks on specific companies, and the executive order earlier this year that limits stock buybacks and pay at defense companies. Among some CEOs, there’s a feeling that the decision-making is personal and beyond their control. “I don’t want to wake up and see me or my company showing up in some Truth Social post,” one executive told me last night. “You build these partnerships over many years; the hope is that it doesn’t matter which party is in power … I wouldn’t make that assumption right now.”

Is the world a safer place? Like many Fortune 500 companies, major defense contractors also do business with U.S. allies. Along with facing increased cyber-attacks amid the war, they’re facing lost deals in Europe and the repercussions of the U.S. going it alone. “The stereotype is that defense companies want to go to war, but that’s not true … It’s very different when you’re mobilizing against a threat or keeping the nation safe.” And, when it comes to waging war, the speed of AI is even more disconcerting, with one executive telling me he’s equally concerned about the Pentagon’s ban on Anthropic’s technology as he is about the capabilities of AI and how it’s being developed by potential adversaries like China: “Warfare is going to change,” he said, adding that “it’s hard to know” how.

Contact CEO Daily via Diane Brady at diane.brady@fortune.com

This story was originally featured on Fortune.com