NASA’s Artemis II mission and market buzz ahead of SpaceX’s upcoming IPO have put the space sector back on the radar for investors. Once the exclusive domain of governments, space exploration is rapidly transforming into a commercially driven industry spanning rockets, satellites, infrastructure, and defense systems. But government spending continues to support financing. The Trump administration earmarked $71 billion for the U.S. Space Force in its 2027 budget, a 77% increase from the previous year. Across the Atlantic, members of the European Space Agency have committed a record 22.3 billion euros ($25.9 billion) over three years. As of May 15, the S&P Kensho Global Space Index is up 45% since the beginning of the year, significantly outpacing the S&P 500, which is up about 8.6% over the same period, demonstrating investor interest in a new era of space exploration. As Voyager Technologies CEO Dylan Taylor recently put it, “Space is hotter than ever.” As capital flows into the sector, analysts are asking where the most sustainable returns lie. Yuri Khojamilian, chief investment officer at TEMA ETF, said the answer lies in a “pure space economy” – companies whose core business is directly tied to space, rather than diversified conglomerates with only partial exposure. His top candidates include high-frequency wireless hardware company Filtronic, Taipei-listed microwave communication solutions company Universal Microwave Technology, and integrated technology solutions company Sphere Corporation. But Khojamilian urged caution and focus on fundamentals when investing in sectors defined by technical complexity and operational risk. “It’s better to pay a premium for a launch platform that actually works than to guess at a launch platform that doesn’t work,” he said. Tejas Desai, director of thematic research at GlobalX ETF, sees particularly strong medium-term opportunities for launch services and reusable rocket technology due to falling launch costs. As access to orbit becomes cheaper, innovation across the sector will accelerate, he said. While Desai highlights Rocket Lab as a leading launch services company, he points to Planet Labs as an attractive opportunity in the data and analytics space. But he cautioned against putting too much faith in individual names, adding that the current coach may not be the dominant player in five years. Spacepicks and Chavell Desai said thematic ETFs are a way to gain broad exposure while reducing the risk of a single company. As the market matures, long-term winners will likely be determined by consolidation, and diverse investors will be in a better position to capture value across sectors, he added. This broader perspective is also reflected in Morgan Stanley’s recent report, Space 60: Picks and Shovels for the Final Frontier. “Space is coming back in a big way,” Morgan Stanley analysts said in a report, noting that investor interest is back to levels not seen since the bank first launched a dedicated space research team about a decade ago. Morgan Stanley highlighted space-related opportunities across broader markets. Analysts say companies such as Alcoa, ATI Inc., Nvidia, York Space Systems and STMicroelectronics represent a broad group of stocks that support the entire ecosystem. The space industry also has an increasing geopolitical dimension. As Mr. Desai pointed out, China has firmly established itself as the world’s second-largest launch power after the United States, and is leveraging state-owned enterprises to rapidly expand scale and compete aggressively on cost. He also said that defense applications for space infrastructure remain “under-discussed and ignored” in the broader market. TEMA ETF’s Khojamilian highlighted space sovereignty and commercialization of government space programs as key themes. Countries including Germany, Italy, and Japan are investing heavily in domestic launch capabilities, satellite constellations, and national space champions. This comes as governments demonstrate a willingness to work with nimble commercial operators rather than relying solely on traditional defense contractors. Kojamilian cited Italian space launch propulsion systems company Avio and German satellite and space systems company OHB SE as examples of companies that stand to benefit from this change.
