Is space the next frontier for investors?

Artificial Intelligence has been the hottest sector of the stock market for the past year. But shares in AI-related companies appear to be cooling after a strong run, with the S&P 500 Information Technology Index SRIT down 5.14 per cent so far in this quarter (to Oct. 23).

So, what’s the next potential industry to capture the public’s excitement? Perhaps space. The thrill and romance of lunar colonies, interplanetary travel to Mars and beyond, and tapping into the riches of the asteroid belt over the next quarter-century have captured investors’ imaginations.

Massive amounts of public and private money are being spent as governments and investors try to get in on the ground floor of the space race. In June, Elon Musk’s Space Explorations Technologies Corp. SPCX-Q completed the largest initial public offering in history, raising US$85.7-billion at US$135 per share. That valued the company at US$1.77-trillion.

The Government of Canada announced last week it is investing $20-million over the next 10 years with NordSpace Corp. to use its Spaceport complex in Newfoundland and Labrador. It has also signed a 10-year deal with Maritime Launch Services Inc. to have access to its Nova Scotia facility.

Is this money well spent, or a science fiction dream? We don’t have much hard information yet, but what we do know suggests caution. After its strong IPO, SpaceX shares quickly shot up to a high of US$225.64. That didn’t last long. By early July it had dropped below its IPO price and hovered around that level ever since. The shares closed on Friday at US$147.49.

Investors love Elon Musk. A merger of SpaceX and Tesla would test their faith

There are two issues that should give investors pause. The first is capital. Space is an inhospitable environment. It is going to cost trillions of dollars to transform the images of mines on the moon or colonies on Mars into reality. In the first SpaceX quarterly report, released last week, the company said it spent US$48-million on capex for the first nine months of fiscal 2026. That’s a drop in the bucket in comparison to what will be needed from the private sector.

The second question is profitability. Connectivity through satellites is already a reality, with SpaceX’s Starlink program operational and growing.

But what else? Are there resources in space that will produce enough cash flow to make it worthwhile to extract and transport the space ore back to Earth? At first glance, yes. Asteroid 16 Psyche is a metal-rich body in the main asteroid belt that is theoretically valued at US$10-quintillion based on its estimated iron, nickel and gold content.

However, scientists consider this price is meaningless because even if the ore could be extracted and transported, dumping huge amounts into Earth’s market would drive down prices to near zero. It’s more likely that space resources will stay in space, mined and used as raw materials for solar collectors, rocket components and robotics. Earth’s gravity well is simply too expensive to navigate. It’s too expensive to travel in and out of Earth’s gravitational influence.

That doesn’t stop people from dreaming. But it will take many years for the dreams to be fulfilled, if they ever are.

SpaceX’s third-quarter results reveal that this is still a relatively small operation. The company reported revenue of US$14.6-billion for the quarter. That was up 161 per cent year-over-year, which might seem impressive were it not for the fact this is a company with a current market cap of almost US$2-trillion.

Tesla posts surprise positive cash flow, spending less than expected on AI

The company showed a profit of US$4.4-million (US$0.35 per diluted share) in the quarter, compared to a loss of just over US$1-million (-US$0.36 per share) in the same period last year. Adjusted EBITDA was US$8.8-billion, up 306 per cent from US$2.2-billion a year ago.

Looking ahead, the company expects first quarter 2027 revenue to range between US$33-billion and US$37-billion.

Readers who are interested in taking a position in this sector should consider an ETF. There aren’t many, and they all own SpaceX as their No. 1 position. But they do offer some diversification. Here’s one to consider.

Tema Space Innovation ETF (NASA-N)

Closed Friday at US$20.39.

Background: This is a new fund, launched in March of this year, but it already has US$950-million in assets under management.

Performance: There’s little history with which to work with and what we have is not impressive. This ETF lost 21.1 per cent ln the three months to Sept. 30.

Key metrics: The expense ratio is 0.75 per cent.

Portfolio: SpaceX is the No. 1 position by far, with 27.9 per cent of the assets. Rocket Lab Corp. RKLB-Q makes up 9.25 per cent of the portfolio with AST Spacemobile Inc. ASTS-Q at 5.44 per cent.

U.S. stocks account for 52.14 per cent of the portfolio with Canada second at 6.91 per cent and Taiwan at 6.88 per cent.

Distributions: None to date.

Action now: This ETF is a Buy for aggressive investors. Patience will be required.

Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.