Investment: These are the most attractive space stocks after the SpaceX hype

The space economy market could soon exceed the trillion mark. It's not just shares in rocket manufacturers that benefit from this. And Elon Musk wants to give every US child a SpaceX share.

Elon Musk announces that he will give every child in the USA a SpaceX share, which for 70 million children is a gift worth around ten billion dollars.

The space economy includes not only rocket building, but also satellites, infrastructure, data centers and orbiting factories that could harness solar energy and weightlessness.

The space economy market is growing to around $700 billion, with a forecast of up to $2 trillion by 2035, according to the Space Foundation.

Investment strategist Daniel Sailer sees opportunities in suppliers like Linde, which supplies 80 percent of all US rocket launches, and companies like Alphabet, which are working on AI infrastructure for orbit.

Cologne. Space is one of the defining investment themes of the year. This is mainly due to Elon Musk, whose space company SpaceX became one of the most valuable companies in the world with its IPO in June.

With a special plan, Musk now wants to significantly expand the shareholder base. The tech billionaire has announced that he will give every child in the US a SpaceX share next year. This will be his first step of this kind “of many,” Musk wrote on his online platform X. However, it is unclear how he will implement this plan.

According to recent census data, there are just over 70 million children under the age of 18 in the United States. At the current price of SpaceX shares, the share package for such a gift to them would be worth a good ten billion dollars.

However, anyone who limits space as an investment topic solely to rocket builders is making a big mistake. The market is not just about rockets, satellite construction and infrastructure.

The analysts at the major US bank JP Morgan write in an industry study: “In the coming years, it could be that the largest companies operating in space are no longer space companies at all.”

For example, data centers or factories could be built in orbit in the future. They could use the solar energy of space or weightlessness to produce materials that cannot be produced on Earth.

The non-profit organization Space Foundation imagines that all of this could turn a billion-dollar market into a trillion-dollar market. She estimates the space industry's sales are now around $700 billion, twelve percent higher than in the previous year. By 2035, the volume could grow to up to two trillion US dollars.

What sounds like a lot of future fantasy and uncertainty finds a convincing basis in the here and now. Moritz Henkel, product manager at US asset manager VanEck: “The most important driver for the broad and long-term growth of the space market is the sharp decline in launch costs.”

The route from Earth to low orbit has become around 95 percent cheaper since the space shuttle era. While it used to cost over $50,000 per kilogram, the transport price on a reusable Falcon 9 launch vehicle from SpaceX is now a few thousand dollars.

The immensely reduced launch costs open up prospects for numerous new applications for the space economy. “There is also increasing demand for connectivity, data and earth observation,” says Henkel.

Ultimately, the industry is receiving support from the government because space is becoming more and more of a political focus. The EU, for example, is pushing forward its own communications network with the “IRIS2” satellite project in order to reduce dependence on other regions.

But how can investors invest in this emerging sector? Daniel Sailer, investment strategist at the asset management division Metzler Asset Management of the Frankfurt bank of the same name, says: “Specialized space stocks have consolidated after the first waves of speculation and have partly given up profits.”

Investors today are demanding resilient cash flows, i.e. cash inflows from a company's operating business, and a clearly recognizable transition from individual production to industrial series production, Sailer continues: "In our view, the most attractive opportunities are not offered by speculative rocket builders, but by established suppliers in the critical value chain."

The investment strategist sees the greatest opportunities in specialty raw materials and fuels. As an example, he cites the world's largest industrial gases company Linde, which comes from Germany but is now formally based in Ireland and listed on the New York Stock Exchange.

“Linde supplies over 80 percent of all US rocket launches and benefits directly from the increasing launch volume,” says Sailer. With a price-earnings ratio (P/E) of 24 based on expected profits for the coming financial year, the share is moderately valued. According to the financial service LSEG, 20 of 29 analysts currently recommend buying.

Sailer also sees opportunities in the area of ​​space-based computing, i.e. data processing and AI calculations directly in space: “Enablers of AI infrastructure in orbit create the basis for direct data processing in space and save valuable bandwidth to Earth.”

He cites Google's parent company Alphabet as an example of this segment. He is currently using a project called “Suncatcher” to examine whether it makes economic sense to move data centers into space. At the beginning of October he launched the first solar-powered prototype into space.

Alphabet's focus remains on advertising revenue in the search engine business and the data center business. The direction of the share price also depends on this. 54 out of 59 experts currently recommend buying the security.

In principle, a direct investment in the space economy remains risky. Because the market is young and up-and-coming and requires high investments. This means that not all projects will be profitable and it is unclear which players will be able to prevail.

In addition, companies come to the capital market with ambitious valuations. A broadly diversified investment approach is therefore recommended. By far the largest space ETF is the “VanEck Space Innovators” (ISIN: IE000YU9K6K2) with fund assets of around 1.6 billion euros.

The largest positions here are the US telecommunications companies Viasat, AST Space Mobile and Echostar. The ETF is up a good 20 percent this year and has therefore performed slightly worse than the US technology index Nasdaq 100. Over the next three years, however, the ETF has gained a good 250 percent, while the Nasdaq 100 has “only” doubled.

The competing products of the ETF division of the US fund giant Blackrock iShares (ISIN: IE000A9G9R73) and the US ETF provider Wisdom Tree (ISIN: IE000VDH1PG3) are significantly smaller with a volume of 26 and 14 million euros respectively. For products with small volumes, there is a risk that the ETFs will not be profitable for the provider and could be closed or merged with another ETF.