China's new stealth fighter spooks Wall Street about Lockheed Martin's F-35
Michael Peck
Updated 5 min read
A Wall Street analyst changed his rating for Lockheed Martin, the prime contractor for the F-35 Lightning II, after photos emerged showing two Chinese stealth-fighter prototypes.US Navy
A Wall Street analyst downgraded Lockheed Martin after photos of new Chinese jets emerged.
The analyst said the US could buy fewer Lockheed F-35s in favor of jets still being designed.
But there's little evidence that China's new aircraft could match the F-35's capabilities.
Glimpses of China's next-generation fighter jet don't worry just the Pentagon.
One Wall Street analyst says the emergence of the jet prototypes could hurt Lockheed Martin — the maker of the three versions of the F-35 Lightning II stealth fighter, the most expensive weapon in history.
A Deutsche Bank analyst, Scott Deuschle, downgraded Lockheed to a neutral rating in early January, saying there's "increased concern" over the "long-term support for F-35 in the face of China's combat aircraft modernization efforts." That's because the new Chinese jets could prompt the US military to buy fewer F-35s in favor of more advanced aircraft.
Lockheed reported this week that its fourth-quarter net income fell 71% to $527 million year over year because of a $1.29 billion loss associated with a fixed-price contract. The company's stock is down 5% this year.
China unveiled two stealth-fighter prototypes in December. Little is known about them, but some worry they could outmatch the F-35, a fifth-generation aircraft that first flew in 2006.
The US military is buying a lot of F-35s. The Air Force plans to acquire 1,763 F-35A models by 2049, the Navy 273 carrier-based F-35Cs, and the Marine Corps 67 F-35Cs and 353 jump-jet F-35Bs.
At the same time, the military is developing sixth-generation fighters, including the Air Force's Next Generation Air Dominance program and the Navy's F/A-XX, the replacement for its carrier-based fighters, like the Super Hornet. The NGAD aircraft, which the Air Force hopes could fly by 2030, will have more advanced features than the F-35, including better engines, sensors, and stealth capabilities, as well as the ability to team with robot fighters such as the Collaborative Combat Aircraft.
An F-35C Lightning II readying to launch from the aircraft carrier USS Carl Vinson in the South China Sea.MC3 Nate Jordan/US Navy
"The reveal of further advancements in combat aircraft capabilities by China" could undermine long-term Department of Defense "demand for the F-35 aircraft," Deuschle wrote.
There's little public evidence, however, to compare the Chinese prototypes pound for pound with the F-35.
The F-35 has become the poster child for what critics denounce as wasteful government spending by the military-industrial complex. The program has been mired in controversy, delays, and cost overruns since its inception in the 1990s. Elon Musk, President Donald Trump's advisor and Tesla's CEO, has called crewed fighter jets like the F-35 obsolete.
The total price of the F-35, including acquisition and maintenance, has soared to more than $2 trillion, which is more than the annual GDP of most nations (the US's gross domestic product is $27.3 trillion). Even though more than 1,000 aircraft have already been delivered to the US and other nations, there are still concerns about bugs such as excessive maintenance demands, fragile stealth coatings, and a cannon that can't shoot straight.
Compounding the problem is that F-35 acquisition will stretch over decades. Only 110 were delivered in 2024, and the US Air Force isn't set to receive the last jet until 2049. Given how rapidly technology evolves, a procurement program that stretches out more than 40 years is bound to struggle with obsolescence at some point.
That said, the F-35 program may be too big to fail. The US military has invested enormous resources — and prestige — in the aircraft, and politicians may be reluctant to kill the golden goose. "More than 1,900 suppliers build and sustain the F-35 program in 48 US states and in more than 10 countries," Lockheed Martin's F-35 website says.
Whatever the flaws of the F-35, what aircraft could realistically replace it right now? The US combat air fleet is aging: The average F-16, for example, is more than 30 years old. The Air Force has hedged its bets by buying some F-15EX fighters to supplement the F-35. But while the F-15 has proved highly capable, an upgraded 1980s design can go only so far into the 21st century.
That leaves the inchoate NGAD as the primary alternative. But this raises another question: Given the problems with the F-35 and other big Pentagon projects, what if America's sixth-generation fighter projects also suffer delays, cost overruns, and teething problems? The Air Force has already paused the NGAD program amid estimates that its fighters will cost $250 million apiece, or about triple the price of an F-35.
Skeptics may also question the alarm over China's new aircraft. So far, all the world has seen is a few images of two new Chinese planes. Despite breathless warnings that China might field a sixth-generation fighter before America does, the capabilities — and limitations — of the Chinese designs have yet to be revealed.
During the Cold War, Russian weapons would be unveiled and spur American fears of falling behind in the arms race, such as the mythical "bomber gap" of the 1950s. Often, these Russian wonder weapons turned out to be dismal on the battlefield. The US and China are vying to develop sixth-generation aircraft and other technologies like hypersonic missiles. But the threat posed by new Chinese stealth aircraft could similarly prove illusory.
Michael Peck is a defense writer whose work has appeared in Forbes, Defense News, Foreign Policy magazine, and other publications. He holds a Master of Arts in political science from Rutgers University. Follow him on Twitter and LinkedIn.
