Space ETFs Hold Massive Upside as the Industry Enters a New Era
While space sector stocks will almost certainly go through cycles of major boom and bust along the path (just look at the drawdowns in the chart above), I think that path is headed much higher in the longer arc of history.
There’s a few reasons for that.
While major progress has been made in the commercial space sector, it’s still early days. Only a handful of companies have a proven track record for launch services so far — and outside of launch, most companies are either focused on manufacturing and/or operating satellites (with much of the current use case being earth observation and telecommunications).
In the longer run it’s natural to expect this to expand to an array of orbital activities such as zero-gravity manufacturing, orbital space habitats for a variety of use cases (from tourism to media, science/R&D, defense) and logistics.
Further out (literally and figuratively) there will be science, tourism, resource extraction/processing/logistics and a host of things we can’t even imagine yet on the moon, near-earth asteroids, mars, and deep space. Particularly as we meet resource and environmental constraints on earth.
But even without that, the reality right now is that we are entering into a new space age where the big drop in cost to orbit is enabling new companies to do new things and open up whole new industries.
Coming back to earth, one interesting angle is that space focused ETFs (such as $Procure Space ETF(UFO)$ $ARK Space Exploration & Innovation ETF(ARKX)$ $Tema Space Innovators ETF(NASA)$ $SPDR S&P Kensho Final Frontiers ETF(ROKT)$ $Roundhill Space & Technology ETF(MARS)$) currently have a market share of about 0.04% — that compares to 0.32% for Aerospace & Defense ETFs (and a market cap weight for US Aerospace & Defense of just over 2%).
That means 2 things: 1. the average investor has very little exposure to this corner of the market, and 2. there’s a lot of room to move to the upside as the industry develops further and investors finally catch-on to what’s going on here.
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