Investing in Space: The Final Frontier of Financial Opportunities
Space exploration has long been considered the domain of governments, offering private companies remarkable opportunities. But like more established sectors, this niche sector also brings its share of risks.
Lower costs, miniaturization (satellites that were once school bus-sized are now the size of dorm fridges) and technological breakthroughs have all lowered barriers to entry; but timing remains key as any trend evolves.
1. Space Tourism
Individuals visiting the International Space Station for short visits have brought commercial space travel one step closer.
Space travel could bring immense economic advantages for Earth. For example, long distance flying costs on Earth can be drastically reduced using high-speed rocket-powered flights connecting dots in orbit around our planet.
Investors can gain exposure to the emerging space sector via exchange-traded funds such as ProcureAM’s SPDR Kensho Final Frontiers ETF (ROKT), which scans regulatory filings for keywords related to outer space such as mission support or tracking or clearing away space debris. Of course, investing in young space tech companies always carries risk, even for highly successful Elon Musk’s Virgin Galactic, which has suffered setbacks.
2. Space Mining
As technology decreases launch costs, private companies have emerged that aim to mine asteroids and the Moon for propellant and other materials – some such as Planetary Resources and Deep Space Industries are even based in the US.
However, claims that Asteroid 16 Psyche contains valuable metals are almost entirely exaggerated; even if this were true, Earth markets would never support enough sales to justify mining and transport costs in space.
As there are no international agreements to govern property rights in space, conflict is inevitable and commercialization could produce more detrimental knock-on effects for society than we’ve witnessed as traditional services like education and housing have become privatized – investors should therefore exercise extreme caution.
3. Space Exploration
Space exploration is among the riskiest of investments available to space enthusiasts, from plans to mine asteroids and make lunar rovers to producing 3D rockets printed directly. Yet experts see catalysts which could accelerate its development.
As newcomers to the industry, newcomers may find it more sensible to invest in downstream businesses – like satellite broadband providers – rather than hardware companies, as those businesses tend to generate recurring revenues more rapidly while having less risk.
Experts often advise investors to include several traditional aerospace and defense companies like Virgin Galactic and Northrop Grumman Corporation in their portfolios, but their space-related segments only account for a fraction of overall business. An alternative choice might be ProcureAM Space ETF which invests exclusively in firms generating substantial amounts of revenue through space related industries.
4. Space Defense
Military space competition has taken on new dimensions with the rise of new security concerns and large defense firms’ desire to purchase capabilities that they deem as important. Siegmann from Fidelity notes: “Their goal is shifting away from customized hardware and niche components towards commercially available technology.”
As the Pentagon increasingly takes cyberthreats against space seriously, defense companies such as Raytheon, L3 Harris Technologies and Boeing have created venture capital arms in an attempt to grab emerging technology necessary for protecting assets in orbit. Other defense contractors like Sierra Nevada Corporation’s Dream Chaser spacecraft also focus on space business.
These large defense and aerospace stocks can make a solid starting point, but you should also explore more risky up-and-coming shoot-for-the-stars growth names such as SpaceX led by Elon Musk or Virgin Group that offer exponential potential growth potential – for instance they both specialize in rocketry with significantly lowering costs while some could even eventually launch large constellations of satellites providing internet, television or business communications around the globe.
5. Space Transportation
After the Cold War, NASA spent billions on its space shuttle program; operations and upgrades consumed an astronomically expensive portion of their annual budget – one launch cost an astounding $400 Million!
Young entrepreneurs in the 1990s found fault with this postwar social contract, seeing government as slow, risk-averse and wastefully doling out cost-plus funds to companies like Boeing.
They reasoned that opening space up to private actors could bring tangible benefits back on Earth. Opening it up could make important scientific research, environmental monitoring and communications less expensive while creating more jobs for Americans – an exciting prospect among New Space supporters, yet some fear its negative repercussions, such as concentrations of monopolistic power and diminished democratic oversight.