Rheinmetall's Ethical AI Push and Japan Ambitions Can't Halt a 40% Slide From the Peak

Rheinmetall CEO Armin Papperger advocates for human-in-the-loop autonomous weapons rules amid 40% stock drop; expansion into Japan and €8.2B tank project highlight strategic ambitions.

The disconnect between Rheinmetall's strategic ambitions and its stock market performance has rarely been starker. While Chief Executive Armin Papperger uses the Eurosatory defense fair in Paris to call for global rules on autonomous weapons — even comparing the need for oversight to nuclear arms regulation — the company's shares have lost roughly 40% from their all-time high of €1,995. At Friday's close of €1,200.20, the stock is trading well below its 200-day moving average of €1,584.94 and has shed about 25% since the start of the year.

Papperger's central demand is that a human being must always retain the final decision to fire, a concept known as "human-in-the-loop." He has proposed establishing an ethics council or seeking a United Nations resolution to enforce that standard. The push comes as Rheinmetall already develops systems capable of autonomously identifying targets using artificial intelligence, though the company insists the crew still makes the ultimate call. The OECD recently classified the risks of autonomous AI weapons as significant, adding weight to the debate.

For investors, this ethical positioning is more than a philosophical stance. Institutional capital is increasingly tied to sustainability criteria, and setting early standards in defense technology could secure long-term backing. Rheinmetall wants to be seen as a responsible guardian of lethal force, not just a weapons merchant.

Geographically, the company is also looking far beyond Europe. According to Japan's Nikkei newspaper, Papperger plans to establish defense production in the country through a joint venture with a local partner. The move aims to unlock both the Japanese market and new export routes in a region racing to rearm amid geopolitical tensions. Rheinmetall is already known in Japan as an automotive parts supplier, but shifting to military technology represents a natural evolution of its global footprint.

A concrete example of hybrid warfare integration is the joint project with Italy's Leonardo to build the new main battle tank NMBT. The contract is valued at around €8.2 billion. Based on the KF51 Panther platform, the vehicle will carry a crew of three soldiers plus a dedicated drone specialist who can operate reconnaissance and attack drones from inside the armored hull. A silent "stealth-watch" mode allows missions lasting up to eight hours, blending traditional armor with unmanned systems.

Yet the story that captivates strategists has failed to lift the stock. The relative strength index stands at about 47, indicating a neutral zone — neither oversold nor overbought after months of heavy selling. The 50-day moving average sits roughly 6% above the current price, and the gap to the 200-day line remains wide. Analysts at Berenberg have maintained a €1,750 price target, suggesting nearly 46% upside, but the market is clearly waiting for proof.

Competition is also mounting. Automotive supplier Schaeffler plans to start producing combat and interceptor drones by the end of 2026, potentially intensifying rivalry in unmanned systems. For Rheinmetall, execution is now paramount. The company must defend its technological lead and convert its pipeline into signed contracts, especially for the Japanese venture. Without a solid floor above €1,100, chart watchers warn of further downside.

The coming weeks will test whether management can deliver tangible agreements that reverse the bearish tone. Rheinmetall needs to show that the marriage of classic hardware and intelligent systems can generate real earnings — and that its ethical pitch and global reach are more than just talking points.