New Year, New Space: Does Space Belong in Your Investment Portfolio?
If you had to guess which government spent the most on space programs, and you guessed the United States, you’d be absolutely correct. In 2020, the United States spent 47 billion dollars, with China coming in at a distant second, at 8 billion.
It’s becoming very clear that the space industry is accelerating, as evidenced by the rapid increases of spending and attention that businesses and investors are aiming towards the stars. Morgan Stanley estimated that revenue from the global space industry could surpass $1 trillion by 2040, up from the $350 billion of today.
“I would like to die on Mars, just not on impact.”
Elon Musk
Many space-skeptics talk down the seemingly frivolous joy rides of billionaires looking for the next kick. What they don’t see is that those same billionaires, pioneers and developers of other industries, know how to leverage their fame to attract investor dollars, and investor dollars aren’t tossed away so easily. These frivolous billionaires know that human expansion into space isn’t a matter of if but when, and the moment that “when” arrives, it’s going to expand the industry into the future. Take, for instance, the industries we already have developed from space. Satellites in space number 3,372 as of right now, the vast majority belonging, again, to the United States. Those satellites are essential to weather forecasting, telecommunications, navigation, etc. And that’s not all.
The Space Industry of the Future
Mining the moon for materials that are impossible to find here on earth is set to be another industry. Helium-3, a rare form of helium containing two protons and one neutron, is speculated to be in abundance on the moon as the moon has no atmosphere and is constantly exposed to solar radiation from the sun which deposits this mineral. Helium-3 has the capacity to release huge quantities of energy without causing surrounding material to be radioactive. Mining the moon, as you might remember from posts on the Emergent blog on the subject, requires a tremendous amount of materials and planning, some of which can be provided from asteroid mining for pure-minerals that don’t need to be refined and can be put to use right away.
The most important aspect of space-economics is that it feeds itself economically. We don’t have to worry too much about not being able to find materials because the materials we are gathering for space are the very same materials needed to expand the space economy. Over time, everything from robotics, clothing, wires, chips, food, will have to be organized. Some economists even speculate that space, like electricity and steam power before it, may trigger the next period of prosperous economic growth.
Per usual, the question in all this is, how do we invest in these technologies and businesses? Picking winners, especially this early in the space industry’s development, is precarious. In many industries, first to market companies are not the ones that succeed, as is evidenced by the fall of eToys and the subsequent success of Amazon.
The Earth is the cradle of humanity, but mankind cannot stay in the cradle forever.
Konstantin Tsiolkovsky
ETFs focused on space exploration and development are already available and able to specialize in different areas of the developing space economy. They range from space and deep-ocean exploration to the supply chain of these space companies, from companies that are developing the hardware and software of the robotic needs of the space industry to some that simply invest in any company that has a portion of their development in space technologies. Either way, there are still decisions to be made and research to be done, but this is a sector that will be developing over the next few years into a staple of investment portfolios.
