Issue #102

Analyzing the AI-driven battery play and the aerospace veteran with a $400M backlog.

The modern defense landscape is no longer being defined by sheer numbers on a battlefield—it is being rewritten in laboratories and high-tech hangars where energy density and thermal efficiency determine mission success. As global security requirements shift toward autonomous systems and rapid-response capabilities, the focus has moved from traditional heavy armor to the critical subsystems that keep advanced tech running longer and cooler.

This is where the defense conversation shifts from hardware volume to specialized endurance—and where two pivotal players are carving out indispensable niches in the 2026 landscape.

👉 One company is leveraging "superintelligent AI" to revolutionize battery chemistry, providing the high-energy backbone for the next generation of NDAA-compliant drones and defense robotics.

👉 The other is a decades-strong aerospace veteran that has become the "thermal brain" for military and commercial fleets, managing the intense heat of modern jet engines and power systems.

👉 Both are scaling rapidly, backed by record-breaking backlogs, and are increasingly vital to the Western defense supply chain.

In this edition, we break down the AI-driven energy cell and the mission-critical thermal systems powering the future of global security—and why these two stocks sit at the foundation of the next decade of aerospace and defense growth.

SES AI Corp (NYSE: SES)

SES AI Corp (NYSE: SES) is a pioneer in the next-generation battery space, specializing in high-performance Lithium-Metal (Li-Metal) and Li-ion technologies. Unlike traditional battery manufacturers, SES distinguishes itself by integrating "superintelligent AI" into its entire development cycle—from molecular discovery to real-time health monitoring. Positioned as a critical player for the defense and aerospace sectors, SES provides the high energy density required for demanding missions in unmanned aerial vehicles (UAVs) and urban air mobility.

Business Model and Revenue Streams 📦

SES AI has transitioned to a "capex-light" platform model designed to scale rapidly without the massive overhead of traditional cell manufacturing. Its strategy centers on three distinct business units, all unified by its Molecular Universe (MU) AI platform:

• Drones and Defense: This is a high-growth segment where SES provides high-energy-density cells for drones and robotics. Critically, the company is pivoting its manufacturing to be National Defense Authorization Act (NDAA) compliant, shifting capacity from EV-focused lines to drone-specific form factors to capture lucrative government and defense contracts.
• Energy Storage Systems (ESS): Following the strategic acquisition of UZ Energy, SES now generates near-term revenue by providing both hardware and AI-powered software to manage battery health, safety, and electricity trading for data centers and industrial clients.
• Materials and AI4Science: SES monetizes its research breakthroughs by supplying electrolyte materials discovered through its AI. This segment operates as a scalable "discovery engine," using a SaaS-like model to license IP and provide specialized materials to other manufacturers.

Current macroeconomic policies, particularly the Inflation Reduction Act (IRA) and the NDAA, are significant tailwinds. By establishing a supply chain that avoids reliance on restricted foreign entities and focusing on domestic and "friendly-shore" production in South Korea and Southeast Asia, SES is positioning itself as a primary beneficiary of U.S. defense spending and energy independence initiatives.

Recent Performance and Corporate Developments 📈

SES AI reported its fourth-quarter and full-year 2025 results on March 4, 2026, revealing a company in the midst of a massive revenue ramp-up.

Q4 2025 Financial Highlights: 💰

• Annual Revenue Growth: SES achieved $21.0 million in revenue for 2025, a staggering 10-fold increase from the $2.0 million reported in 2024.
• Quarterly Momentum: Q4 revenue hit $4.6 million, up 124% year-over-year. While this slightly missed some aggressive analyst targets due to $1.5 million in revenue shifting into Q1 2026 for logistics reasons, the underlying growth trend remains intact.
• Operational Discipline: The company significantly reduced its GAAP operating expenses by 40% year-over-year, demonstrating a leaner, more efficient path toward scaling.
• Liquidity: SES exited the year with a robust $200 million cash position, providing a capital runway into 2028.

Strategic Initiatives and Mergers: 🤝

The defining corporate event of the past year was the acquisition of UZ Energy, which accelerated SES’s entry into the ESS market and provided an immediate revenue base. Furthermore, the company announced a major pivot in early 2026: converting its Chungju, South Korea facility from EV cell production to NDAA-compliant drone cells. This move aligns perfectly with the current defense landscape, which prioritizes secure, non-adversarial supply chains for unmanned systems.

Profitability and Fair Value 🎯

SES AI is currently in the "growth-and-scale" phase and is not yet profitable on a GAAP basis, reporting a net loss of $73 million for 2025. However, the trajectory is improving; losses per share narrowed from $0.31 in 2024 to $0.22 in 2025.

The company's path to profitability is tied to its high-margin AI4Science and software features. By attaching its "Predict" software (which monitors battery health) to its hardware sales, SES can transition from a low-margin hardware vendor to a high-margin technology partner. In terms of valuation, the stock has seen massive volatility, trading around $1.10 - $1.70 in early March 2026. While speculative, the "fair value" is increasingly tied to its $200 million in liquidity and its unique position as a software-first battery company in a sector dominated by hardware-heavy giants.

Analyst Estimates and Ratings 📊

• Consensus Rating: The consensus remains a "Buy" among the specialized analysts covering the battery-tech sector, with a flurry of positive sentiment following the 2025 annual report.
• Price Target: Wall Street analysts have set 12-month price targets ranging from $2.00 to $4.00. Even at the conservative end, this suggests a potential upside of nearly 80% from current levels, while the high end implies a 260% gain.
• 2026 Guidance: Management has issued 2026 revenue guidance of $30 million to $35 million, representing roughly 50% year-over-year growth.

Investor-Focused Takeaway: Is SES Right for Your Portfolio?

SES AI is a high-reward play on the intersection of AI, energy storage, and national defense. The company has successfully navigated the "Valley of Death" for startups by securing $21 million in revenue and pivoting toward the high-demand drone and defense markets.

What to Watch in the Near Term: 📈

• NDAA Conversion: Monitor the progress of the South Korea facility conversion; successful production of drone cells is the primary catalyst for 2026.
• Molecular Universe Breakthroughs: The discovery of new materials through their AI platform could lead to new Joint Ventures (JVs) or licensing deals that require zero capital expenditure.
• Defense Contracts: Any official announcement of a contract with the Department of Defense (DoD) or major defense primes (like Lockheed or Raytheon) would likely trigger a significant re-rating of the stock.

Recommendation:

SES AI is a "Speculative Buy" for investors looking to capitalize on the electrification of defense. Its strong cash position and strategic pivot to NDAA-compliant drone technology make it one of the most interesting small-cap defense-adjacent stocks to watch this month.

TAT Technologies Ltd (NASDAQ: TATT)

Our second defense pick for March 2026 is TAT Technologies Ltd (NASDAQ: TATT). A veteran in the aerospace and defense sector with over 70 years of experience, TAT Technologies has evolved into a specialized powerhouse focusing on thermal management and power systems. The company is currently riding a wave of increased defense spending and a robust recovery in commercial aviation, positioning it as a high-conviction "Buy" among analysts this month.

Business Model and Revenue Streams 📦

TAT Technologies operates through a diversified model that balances long-term manufacturing contracts with high-margin recurring services. Its business is built on four primary pillars:

• OEM (Original Equipment Manufacturing): TAT designs and manufactures advanced thermal management solutions (heat exchangers and cooling systems) for both military and commercial aircraft. This segment benefits directly from new aircraft production cycles.
• MRO (Maintenance, Repair, and Overhaul): This is the company's most significant growth engine. TAT provides essential maintenance for Auxiliary Power Units (APUs), landing gear, and heat transfer components. By securing multi-year Long-Term Agreements (LTAs) with major airlines and defense agencies, they ensure a steady, predictable cash flow.
• Jet Engine Component Services: Specialized repair and reconditioning of vital engine parts, leveraging their high-end technical expertise.
• Trading and Leasing: A strategic unit that buys, overhauls, and leases aerospace systems, providing flexibility during supply chain fluctuations.

Current macroeconomic policies are playing a dual role for TAT. On one hand, the "Year of Delayed Policy Impact" in 2026 has seen a surge in U.S. and allied defense budgets, directly benefiting TAT’s Israeli and American operations. On the other hand, the company faces "tariff shocks" and trade uncertainties that have led to strategic stockpiling and a focus on supply chain resilience. Their recent brand unification—merging TAT Limco, TAT Piedmont, and TAT Israel—was a direct response to these macro pressures, aimed at improving operational efficiency and global collaboration.

Recent Performance and Corporate Developments 📈

TAT Technologies entered 2026 with significant momentum, supported by a record-breaking backlog and aggressive contract wins.

Recent Financial Highlights (Q3 2025 - Q1 2026 Trend): 💰

• Revenue Growth: In its most recent full-quarter report (Q3 2025), TAT saw revenues rise 14.3% to $46.2 million. Analysts expect this trajectory to continue, with 2026 revenue projected to hit $216 million.
• Profitability Surge: Net income for the first nine months of 2025 jumped nearly 60% compared to the previous year, driven by a significant expansion in gross margins (now reaching roughly 25%).
• Strategic Backlog: The company maintains a massive backlog exceeding $400 million, providing clear visibility into 2027 and 2028 earnings.

Strategic Initiatives and Mergers: 🤝

While there have been no major external acquisitions in early 2026, the company successfully completed its internal consolidation of global business units in late 2025. This "One TAT" strategy has already begun to streamline their bidding process for large-scale defense contracts. Additionally, in January 2026, TAT secured a $14 million landing gear MRO contract with a major U.S. airline and reported over $22 million in cumulative defense contracts for its Israel-based subsidiary, highlighting its critical role in regional security.

Profitability and Fair Value 🎯

TAT Technologies is firmly profitable, with a trailing 12-month net margin of approximately 9% and a return on equity (ROE) of 11.2%. The company has transitioned from a turnaround story to a consistent earnings grower.

In terms of fair value, the stock has experienced a significant "re-rating" in early 2026. After trading in the $30s and $40s last year, TATT opened March 2026 near $58.93. While its P/E ratio of approximately 44x reflects high growth expectations, its debt-to-equity ratio of 0.06 is exceptionally low for the industrial sector. This "clean" balance sheet provides the company with a massive "dry powder" reserve to pursue accretive acquisitions or R&D for next-generation cooling systems for AI-heavy military hardware.

Analyst Estimates and Ratings 📊

• Consensus Rating: TAT Technologies is a unanimous "Strong Buy" or "Outperform" among the 8 analysts currently covering the stock. Notably, it has received zero "Sell" or "Hold" ratings in the last 30 days.
• Price Targets: Analysts have been aggressively raising their targets following the start of 2026. The current median price target stands at $60.00, with high-end estimates from firms like Truist Securities reaching $65.00.
• Technical Outlook: Market indicators such as the Aroon Indicator and MACD triggered bullish signals in late February and early March 2026, suggesting that the stock’s upward momentum is likely to persist through the month.

Investor-Focused Takeaway: Is TATT Right for Your Portfolio?

TAT Technologies offers a rare combination of "Old Guard" stability and "New Growth" catalysts. As defense forces worldwide modernize their fleets and commercial airlines push for longer maintenance intervals, TAT’s specialized niches become increasingly indispensable.

What to Watch in the Near Term: 📈

• Q4 2025 Earnings Release: Estimated for April 1, 2026. Watch for a potential beat on EPS, as recent contract flow suggests strong execution.
• Geopolitical Stability: As an Israeli-headquartered company with global operations, any shifts in regional tensions can cause short-term volatility, though they historically lead to increased defense orders.
• Margin Expansion: Keep an eye on whether the "One TAT" consolidation continues to lower operating expenses as a percentage of revenue.

Recommendation:

TAT Technologies (TATT) is a premier mid-cap pick for investors who want exposure to both the commercial aviation recovery and the secular trend of increased global defense spending. With a record backlog and a pristine balance sheet, it is a defensive stock with offensive growth potential.

Final Take: The Energy Backbone and the Thermal Brain Powering Defense

The future of global security isn't just about platforms and headlines—it’s about endurance and efficiency at the edge. And that requires two things: energy density that keeps autonomous systems in the air longer, and thermal management that protects mission-critical hardware from extreme stress.

That’s where SES AI Corp (SES) and TAT Technologies (TATT) stand apart.

🔋 SES AI Corp (SES) — The AI-Driven Energy Backbone

• ✔ NDAA-Compliant Pivot: Shifting production to secure, US-aligned drone and defense battery cells.
• ✔ 10x Revenue Growth: Exploded from $2M to $21M in annual revenue, proving the commercial viability of Li-Metal.
• ✔ Software-First Safety: AI-powered "Predict" health monitoring creates a high-margin recurring revenue stream.
• ➤ Best for: Investors looking for high-upside exposure to the electrification of the battlefield and the "superintelligent" discovery of next-gen materials.

❄️ TAT Technologies (TATT) — The Thermal Brain of Global Aviation

• ✔ Massive $400M+ Backlog: Providing multi-year visibility and stability through the 2026–2028 cycle.
• ✔ "One TAT" Efficiency: Internal consolidation is driving record net income growth and margin expansion.
• ✔ Pristine Balance Sheet: Near-zero debt allows for aggressive R&D and strategic acquisitions in a high-rate environment.
• ➤ Best for: Investors seeking a profitable, mid-cap compounder that sits at the intersection of a commercial aviation recovery and increased allied defense spending.

Investor Insight

⚡ Want high-beta exposure to AI-designed energy and drone tech? → SES

⚙️ Want a fundamentally sound, debt-free leader in aerospace cooling? → TATT

Bottom Line:

Modern defense doesn't scale on firepower alone—it scales on power density and thermal endurance.

SES AI is building the cells that provide the range, while TAT Technologies provides the cooling and power systems that keep the fleet mission-ready. As global defense budgets shift toward advanced technology and autonomous systems, SES and TATT aren't just participants—they are foundational.

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Happy Trading
​— Team Premium Stock Alerts