Q&A: Space investing after the SpaceX IPO

Q: Taylor, in the fall you outlined three growth drivers that have made commercial space businesses more economically viable. How have they developed?

Taylor Portman: The three drivers – communications, defense, and infrastructure – are all still in place, but the picture has sharpened.

The SpaceX IPO reinforced the communications story. Before the listing, I’d have said maybe 5% of the global internet traffic could plausibly move through space connectivity. There are now bullish forecasts closer to 50%. I think that is too optimistic, but 20% to 25% feels realistic — a meaningful shift in the conversation from a year ago.

And it’s not just broadband service to homes and businesses; we’re now seeing early movement on mobile connectivity – satellites that talk directly to ordinary phones – and space increasingly functioning as part of the internet’s backbone for long-haul data.

On defense, the case has only strengthened. Space is the ultimate high ground: An advantage in orbit translates into an advantage on the battlefield, particularly in electronic warfare – using the electromagnetic spectrum for communications, sensing, and counter-drone operations.

We’re also seeing more rendezvous and proximity operations (RPO), where satellites use improved in-space propulsion to maneuver close to others to observe or interfere. RPO capabilities keep improving, which is one of the reasons resilient communications and GPS alternatives keep getting more attention. One open question is whether the U.S. ultimately deploys space-based interceptors as part of Golden Dome. That decision would meaningfully shape the opportunity set.

What about the infrastructure piece, particularly the lunar program?

Taylor: NASA wants to ramp toward six to seven lunar missions a year by around 2030, with a U.S. base targeted at the moon’s South Pole. Attractive lunar real estate is limited by solar power and water access, so the strategic stakes are real. It’s an aggressive schedule that depends on NASA and heavy-launch providers all executing.

Other future infrastructure opportunities – like the replacement of the International Space Station – are on a longer timeline, but the pipeline is filling in.

David, what are the key implications of the SpaceX IPO for the industry and for investors?

David Chung: I’d caution against reading too much into the IPO itself. SpaceX has been around for 25 years, and the offering doesn’t change the strategy – it accelerates what was already happening. The capital is being deployed aggressively across rocket production, satellite manufacturing, and terrestrial AI data centers. This is a company that would have pursued all those things anyway.

The IPO also clarified how the business itself has evolved. A few years ago, SpaceX was effectively two companies: rocket launch and satellite broadband. The merger with xAI added a third leg: large language model development and sizable terrestrial data center buildout.

The longer-term version is to move data center capacity off the ground entirely. Power costs keep climbing and nobody wants one next door. Orbital data centers may sound like science fiction, but the concept is more plausible than some of the other ideas often attached to space stocks. Investors should treat it as optionality rather than a base case, with the timeline and scale still very much open questions.

How do you think about separating the compelling space thematic story from actual investment opportunities?

Taylor: The SpaceX IPO may open the door for more space and defense-tech companies to go public, and there’s a reasonably robust pipeline expected over the next year or more. The pipeline is more concentrated on the defense-tech side near term, with pure-play space names probably a bit further out.

The harder question is how to evaluate what comes through that door. In small caps, we frame it as contenders versus pretenders. We’ve met with dozens of companies, public and private, and many are still closer to the PowerPoint stage than real, ongoing businesses. Where we have conviction, it’s grounded in long-term discounted cash flow analysis, not the expectation for substantial near-term results. The space growth story is real, but it has to be paired with valuation discipline and a clear view on whether the company can actually execute.

David: It’s also worth separating the secular space theme from what makes SpaceX specifically what it is. SpaceX is a unique company that isn’t easily comparable to others in the sector. Investors excited about the management team should be careful not to assume those sort of company-specific attributes transfer to other businesses in the space sector.