It's slightly more complicated than that. No doubt it's a stimulus to defense contractors, but this money also comes with stipulations. For example, Israel is not allowed to sell certain military technologies (of its own invention) to countries like China. It also secures further defense trading with Israel which has about $18 billion allocated per year for defense spending (with $3 billion of that coming from the US). So Israel is encouraged to spend more money beyond that $3 billion on American defense tech and weapons.

Also we give about $1.5 billion to Egypt to spend on American weapons so it's definitely not exclusive to the only democracy in the mid east.