Control space, control the world: how to invest in the space economy

65 years. That’s how long since humans first entered space, and it’s only a few years shy of 60 since the first moon landing.

Here we are again, engaged in a new space race, with the recent successful Artemis II lunar flyby a significant example of the world’s renewed interest.

The first space race was a story of prestige and dominance as the USSR and the United States battled.

Now?

It’s about control. Control space, control the world.

More than 80 nations are engaged in the space race today. Even Australia now has its own space agency. To ignore space is to leave your destiny to others. If that sounds dramatic, then it’s time to consider the true potential of space. The power of communications and weapons systems that rely on satellites. The resource and economic potential of the Moon, and planets like Mars. Scientific research.

There’s also the more frivolous side: tourism. Commercial spaceflight has already become available to the ultra-wealthy through companies associated with figures such as Elon Musk and Jeff Bezos.

The space economy was worth $613 billion in 2024, with the commercial sector responsible for 78% of growth. McKinsey & Company estimates it could be worth $1.8 trillion in nine years’ time.

It has been dominated by government spending and private market investment – but, like other major themes such as AI, it is now coming to publicly listed markets and will be a major future growth driver. The anticipated IPO of SpaceX, which has been widely reported as possible this year, is just one example of this movement.

Investing in space is an emerging trend for investors and one to watch. In this article, I’ll explore the growth potential and different methods of exposure.

Why invest in space?

When investors think of space, they may think of great innovations or simply of that groundbreaking footage of Neil Armstrong stepping onto the moon. Space could become a massive industry, and many businesses are positioning themselves to benefit from it.

McKinsey & Company divides the ‘space economy’ into two parts:

1. Backbone applications: satellites, launchers, services like broadcast TV or GPS
2. Reach applications: areas where space-enabled technology helps generate revenue. For example, Uber relies on satellite signals and chips inside phones to provide GPS directions and connect drivers and riders.

McKinsey projects that the space economy’s annual growth rate will be twice the projected rate of GDP growth over the next decade – similar to the growth for semiconductors.

The growth in the space economy is being driven by:

• The need for greater connectivity via satellites.
• Higher demand for positioning and navigation services on mobile phones.
• Increased demand for insights powered by AI and machine learning.

Hugh Lam, Investment Strategist for Betashares, notes that while the space economy is nascent, there are areas starting to see tangible revenue.

“Broadband is one of these. There are two and a half billion people without access to low-latency, high-speed internet. This is a big tangible market to address. 

There is also a need for maritime and airline connection. Companies like SpaceX through its Starlink subsidiary are taking advantage of that,” he says, explaining that Starlink has 75,000 maritime vessels contracted already, each paying US$250/month for 50GB of data.

He also shares the example of how millions of Ukrainians turned to Starlink for internet services after the Russian invasion, and these citizens would otherwise have been completely isolated.

Technological improvements are reducing costs and improving efficiency involved in operating in space, making it more appealing to companies to use.

Space is becoming a significant aspect of national security – hence why even Australia has dipped its toes in by establishing its own space agency.

The Australian Space Agency highlights use cases (beyond those mentioned earlier) such as:

• Earth observation and associated communications and data, such as for use in surveillance, agriculture, transport, mining and military operations.
• Global positioning, navigation and timing products and services.
• Products and applications that use space-based data, such as atlases and maps.

It also identifies associated industries that support space exploration and research, such as advanced manufacturing and hardware, satellite development, software, spacecraft and other equipment.

To give a practical example of what space technology means for Australia, consider how satellites can be used to monitor disasters such as floods or bushfires.

Investing in the space economy

The space economy is at an inflection point, as falling costs make profitability more achievable for some companies

There is a wide range of listed space-focused companies for investors to consider – along with a projected IPO later this year from Elon Musk’s SpaceX which is known for reusable Falcon rockets, the Dragon spacecraft, the Starship program for Mars exploration and the Starlink satellite network for global internet coverage. You’ll typically find these listed on US exchanges.

Some examples include:

• Virgin Galactic (NYSE: SPCE): An aerospace and space travel company. It is currently focused on new ‘Delta class’ spaceships and resuming commercial flights later this year.
• Rocket Lab (NYSE: RKLB): An end-to-end space company delivering launch services, spacecraft design and manufacturing, satellite components and flight software. It recently announced significant new defence contracts with the US Department of Defense and allied partners and the successful static fire test of its medium-lift Neutron rocket. It also signed an agreement to acquire Motiv Space Systems which specialises in space robotics, motion control systems and precision mechanisms for spacecraft.
• AST SpaceMobile (NYSE: ASTS): A satellite designer and manufacturer which is building a space-based cellular broadband network to connect directly to mobile phones.
• Intuitive Machines (NASDAQ: LUNR): A space infrastructure and services company that builds spacecraft and space systems. It recently secured a NASA contract to deliver science and technology payloads to the lunar South Pole.

One that Betashares’ Lam finds particularly interesting is Planet Labs (NYSE: PL) which uses satellite data for earth mapping that is used in industries like shipping and agriculture.

“They recently signed a €240 million contract with the German government and are expanding relationships with NATO and the US National Geospatial Intelligence Agency,” he says.

“The quality of their revenue is quite sticky. Around 90% of their revenue is monthly and SaaS-like subscriptions. This has meant their gross margins are around 55-60% and they have reached profitability on an EBITDA basis for the full year,” Lam adds.

Investors don’t have to take the emerging (often unprofitable) path for exposure to the space economy. Many large established businesses with diversified revenue streams have exposure to the space economy. Some familiar names to investors include:

• Boeing (NASDAQ: BA): Invests in satellite production, communications and defence-related space infrastructure.
• Lockheed Martin (NASDAQ: LMT): A key contractor for the US Space Force developing space-based missile warning and tracking systems. Is a key contractor for the Orion spacecraft used in Artemis missions and has been investing in the UK space satellite and partnerships.
• Airbus (EPA: AIR): Provided the European Service Module for the Orion spacecraft. It is also a major satellite manufacturer, is collaborating with the South Australian government on a dedicated Australian Space Park, and is involved in projects including the European Large Logistics Lander and the Starlab space station.
• Garmin (NASDAQ: GRMN): GPS-enabled technology. Garmin supplies technology for NASA missions and has been expanding its satellite connectivity.

Investing in space on the ASX

It’s traditionally harder to find space companies on the ASX and many pure-play options are private companies. That said, there are many broader-based companies with exposure to space and which will benefit from continued investment in the space economy.

Some options for ASX exposure include:

• Electro Optic Systems Holdings (ASX: EOS): Satellite communications and space situational awareness
• Silex Systems (ASX: SLX): Uranium enrichment technology, with potential relevance to advanced energy systems that could have future space applications.
• BrainChip Holdings (ASX: BRN): The Akida processor processes data in real time and may have applications in satellite imaging and space robotics. It was launched aboard the Optimus-1 spacecraft successfully.
• DroneShield (ASX: DRO): Counter-drone solutions, relevant for defence and surveillance, which may benefit from rising investment in defence, surveillance and satellite-enabled monitoring.
• RocketDNA (ASX: RKT): A drone-based data services provider with exposure to aerial surveying, mapping, security, surveillance and asset inspection. Its link to the space theme is indirect.
• HighCom (ASX: HCL): Australian defence and space manufacturing company. It has also been involved in developing and testing advanced composite materials for satellite deployment. It has a contract for counter-drone products with the Australian Department of Defence.

Bear in mind that some of these, such as RocketDNA, are microcaps or growth businesses that may not yet be profitable. Investors looking at microcaps should be conscious that such businesses can be subject to higher volatility and risk of loss. 

Australian investors looking for managed fund options may find private equity exposures depending on the manager or indirect exposures through equity fund managers who include some of the Australian names within their portfolios (or have a defence industry thematic).

In recent years, Australian investors seeking listed ETF exposure have largely had to use US-listed funds such as the ARK Space & Defense Innovation ETF (NYSE: ARKX) or Procure Space ETF (NYSE: UFO).

This week, Betashares launched the Betashares Space Industry ETF (ASX: RCKT), which focuses on 30 companies in the global space industry value chain. Its index includes a fast-track feature that may allow eligible newly listed companies to be added shortly after IPO.

To the moon and beyond

Australian investors considering investment in this space should consider that it is a nascent industry and a growth theme. Many companies are not yet profitable, and it could take time to see returns. There’s also regulatory uncertainty as governments start to define how to manage the space economy and investment in this industry.

At this stage, many of the more profitable listed companies with space exposure also have deep links to the defence industry – this can be a challenge for some investors with an ESG focus.

For those considering exposure in their portfolio, Betashares’ Lam suggests the space economy fits best as a satellite allocation within a portfolio – a smaller allocation to a theme with structural advantages propelling growth in the form of government commitments.

Editor’s note: Betashares is a Livewire Partner. This article was planned before the launch of RCKT. RCKT has been included because it is directly relevant to the article’s focus on listed ways Australian investors can access the space theme.