To infinity and beyond: New frontiers in investing

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New ways of accessing and exploiting space could spell future opportunity, says BNY Mellon investment strategist George Saffaye.

A new Space Age has begun. According to trade publication Spaceflight Now, the 114 launch attempts in 2020 tied 2018 for the most orbital launches globally since 1990, when Cold War-era military budgets helped propel more missions into orbit.

For BNY Mellon global investment strategist George Saffaye, this increased launch cadence makes for interesting viewing from an investment perspective.

We expect the space economy to grow at between 6-8% or higher in the next decade driven by rapidly falling launch costs, especially as we move toward the commercialization of space, where private/public companies become far more involved,” he says. “Growing demand will provide a platform for reusable rocket developers to continue to improve their products, further lowering costs.”

In time, he says, cheaper access to space should enable other ventures to flourish. Indeed, some estimates show the global space industry could generate revenue of more than US$1 trillion or more in 2040, up from US$350bn, currently¹. “Over the next several years, we believe investments will expand beyond national defense and providing satellite-based internet access to unserved populations and geographies,” he comments. 

So which areas could be ripe for investment? According to Saffaye, there are three main hubs for commercial innovation: launch technology, tourism and hypersonics.

Launch technology: Up and away

As technology becomes more ubiquitous, says Saffaye, our reliance on satellites will only continue to grow, as we leverage these systems for everything from agriculture, to internet access, to supply chain data, as well as environmental monitoring and considerably more.

Meanwhile, the reduced costs of satellites themselves – as well as falling launch costs means more and more companies will consider creating their own satellite networks and constellations. “Launching and maintaining satellites and their networks is only part of the opportunity,” explains Saffaye. “We expect to see growing opportunity in the burgeoning support ecosystem from supplies of materials and equipment, to space-based data and analytics.”

Holidays in the sun

Space tourism is another potential area of opportunity, according to Saffaye. This could center on orbital, suborbital and lunar space tourism. To date, only Russia has offered this kind of service – to the International Space Station (ISS), at a cost of US$20-$25m per cosmonaut – but this practice ended in 2010 due to the requirement for larger crews on the ISS and the need for bigger expedition crews overall.

Today, sub-orbital trips are the focus of several companies, some with their plans now well advanced. Costs could reach upwards of US$200,000 per passenger and year-long waiting times are expected once the first flights take place.

Faster than a speeding bullet

The final area of innovation highlighted by Saffaye is hypersonics. Here, the design of new aircraft could see the resurrection of hypersonic flight on a regular commercial basis. “While much of that ended when the Concorde retired over a decade ago, we have now advanced the technologies from design to build and have also overcome key issues such as sonic booms,” he says. “That means the runway is clear for hypersonic flight to further transform travel as flight times are drastically reduced and time-utilization greatly enhanced.”

¹ Morgan Stanley: ‘Space: Investing in the Final Frontier’, 24 July 2020.

Important Information

https://www.bnymellonim.com/outlook/global-disclosure

GE567903   Expiry date: 19 November 2021

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