BWX Technologies falls 14% as AI rally eclipses defense
BWX Technologies dropped 14% in a month as investors chased higher-beta AI stocks, though fund managers highlight its strong position in nuclear energy and defense modernization.
BWX Technologies shares fell 14.2% over the past month, closing at $173.09 on July 21, 2026, as capital rotated away from established defense contractors and toward artificial intelligence. The drop contrasts with the stock's 22% gain over the past 52 weeks and leaves it well below its peak of $241.82.
The decline occurred during a stellar quarter for small and mid-cap growth equities. Markets rebounded strongly in the second quarter as concerns over economic growth, trade policy, and AI durability eased, driving one of the strongest SMID-cap performances in 25 years.
The Polen 5Perspectives Small-Mid Growth Strategy, which holds the nuclear components manufacturer, returned 28.2% net of fees in the period. This beat the 24% return of the Russell 2500 Growth Index, yet investor enthusiasm bypassed the $15.86 billion company.
"Shares lagged during the quarter despite solid fundamentals, as investor enthusiasm shifted toward higher-beta Al and technology-related beneficiaries during the market rally," Polen Capital wrote in its second-quarter investor letter. The asset manager's broader portfolio benefited significantly from this tech-driven rotation.
Despite the underperformance, Polen emphasized that BWXT remains well positioned to capitalize on growing investment in nuclear energy and defense modernization. The company primarily supplies nuclear components and services to the U.S. Navy, while expanding its footprint in commercial power and advanced reactor technologies.
Polen noted that continued investment by hyperscalers and enterprise customers has reinforced confidence in the AI infrastructure cycle. This buildout is driving growing electricity demand, creating long-term opportunities across power generation and grid infrastructure.
Institutional momentum in BWXT has cooled slightly amid the shift toward technology. Hedge fund interest declined, with 61 portfolios holding the stock at the end of the first quarter, down from 64 in the previous quarter.
The current valuation gap illustrates a key market dynamic for professional investors. While the structural tailwinds for nuclear power remain intact, capital is currently prioritizing immediate AI beneficiaries over the physical infrastructure required to sustain them.
