Space Race 2.0

Space Race 2.0

Private capital has replaced taxpayers as the space industry's main backer. This analysis examines where the capital is flowing, which companies lead, and what investors should weigh.

In 1966, NASA spent $5.9 billion, about 4.4% of total federal government spending for the year. Roughly four cents of every federal dollar went toward a single goal: beating the Soviet Union to the Moon, a race the United States was losing. The Soviets had put the first satellite and the first human in orbit, sent the first person on a spacewalk, and that February landed the first probe softly on the lunar surface. Three years later, Apollo 11 settled the matter, and capitalism had beaten communism to the most visible finish line there is. The irony is that it won with one of the most government-heavy programs in American history.

Today NASA receives $24.4 billion, about a third of one cent of every federal dollar. Washington's interest in space is as strong as ever, but the money now flows through two channels: defense and contracts with private companies. The Pentagon has requested more than $126 billion for national security space in fiscal 2027, and NASA now buys astronaut rides, station cargo, and lunar landers from companies that own and operate the hardware. With federal spending at $7.4 trillion against a $2 trillion deficit last fiscal year, a 1966-sized program for every ambition would be a hard sell to taxpayers, and private industry has shown it can deliver much of the work at a fraction of the old cost.

Figure 1. The Two Space Races Compared

Russia, the original rival, launched 17 times last year, down from 24 in 2021, while China flew 92 missions in 2025 and is targeting roughly 140 this year. China still trails by a wide margin, however, since the United States flew 193 missions last year and Starlink alone has more than 11,000 satellites in orbit against roughly 490 across China's two broadband constellations. Beijing nonetheless calls this era "Space Race 2.0," and China's space budget grew 10% last year. That framing is indicative of the true motives behind this race: connectivity, data, and defense. The lasting economic and strategic advantage likely goes to whoever builds the infrastructure first.

That raises an important question. If governments are no longer writing the biggest checks, what convinced private capital to foot the bill?

The Space Shuttle was supposed to make spaceflight routine and affordable. Although it was originally designed for reuse, between flights the orbiters and boosters required so much refurbishment that each launch cost about $1.5 billion, or roughly $54,500 per kilogram carried to orbit. Washington has never had much trouble spending money; efficient spending seems to be a recurring struggle.

Falcon 9 changed the economics with a first stage that flies back and lands under its own power, so the most expensive part of the rocket can be refueled and flown again. Throwing away a rocket after one flight is like scrapping a 747 after a single trip. The capability to reuse spreads the cost of the hardware across dozens of flights. SpaceX passed its 600th reusable launch by mid-2026, and NASA's analysis puts Falcon 9 at about $2,720 per kilogram, roughly one-twentieth of the Shuttle's cost, though that figure is the price of a full rocket. Smaller customers sharing a ride pay $6,000 to $7,000 per kilogram, and SpaceX's rideshare manifest is booked into 2028.

Figure 2. Launch Cost per Kilogram to Low Earth Orbit

Lower launch costs have lowered the breakeven threshold per mission as well as the subsequent financial risk. In 2025, 4,492 spacecraft reached orbit, up 62% in a single year, and nearly 90% of them were commercial. Once infrastructure is in place, each new venture builds on the last. The Moon's poles hold water ice that theoretically could be converted to rocket fuel, and talk of a Mars colony sounds a little less far-fetched when a single Starship flight, the vehicle's first orbital mission, carried 26 broadband satellites at once.

Then there's the idea that may capture this moment best: data centers in orbit. Nobody wants a giant data center next door. In orbit there's near-constant sunlight for power and no need for water. Investors put nearly $500 million into orbital data center startups in the first half of 2026. The constraint is physics, since a vacuum is a poor place to shed heat, and Lonestar Data Holdings president Steve Eisele, quoted in Space Foundation's 2026 report, estimates orbital data centers cost 4 to 10 times more to build than ground-based ones, with profits possibly a decade away. Even so, SpaceX has filed plans with the FCC for a constellation of up to a million satellites for exactly this purpose, so at least one company is betting heavily on it.

The global space economy reached $686 billion in 2025, up 12% from the year before, according to the Space Foundation. Ten years earlier it stood at $344 billion. Estimates vary with definitions (Novaspace, which counts differently, puts 2025 nearer $626 billion), but every major tally points in the same direction.

Most of that money never leaves the ground, with satellite-enabled products and services making up 71% of commercial space revenue last year: the navigation in every phone and car, the timing signals behind bank transactions and power grids, the imagery insurers use to assess storm damage. Navigation services alone brought in $280 billion. Space infrastructure has settled so deeply into daily life that most people treat it like electricity or running water.

Figure 3. Global Space Economy, 2005 to 2025

The commercial share in Figure 3 has held between roughly 70% and 80% for two decades, but the internal mix has changed, with the fastest growth segment now in the hardware layer. Commercial satellite manufacturing revenue rose 67% last year and commercial launch revenue rose 49%, while satellite television, one of the industry's oldest businesses, shrank 8.2%.

So, what’s the potential addressable market here? In 2025 the Space Foundation projected the space economy could cross $1 trillion as soon as 2032, and the OECD now describes it as approaching the size of the global semiconductor industry. The markets that could matter most, including orbital computing, lunar resources, and satellite-based cellular coverage, are only beginning to form, so the upper limit remains an open question.

Figure 4. The Commercial Space Value Chain

Figure 4 reads left to right, the way value moves through the industry. Builders make the satellites and the parts inside them, and launch providers get that hardware to orbit. Operators run the broadband, phone, and imaging networks that generate most of the revenue, and the last stage puts that capacity to work in defense, on the Moon, and in markets that barely existed five years ago.

SpaceX spans three of the four stages. The company builds the rockets, launches the satellites, and sells capacity to the Pentagon through Starshield, while nearly every other operator on the map pays someone else for a ride, often SpaceX. The field is also wider than the headlines suggest, since more than 120 organizations in 37 countries launched commercial satellites last year, yet Starlink satellites alone accounted for nearly four of every five commercial spacecraft that reached orbit.

The first consolidation has also arrived, as Amazon agreed in April to buy Globalstar in a deal the companies valued at about $11.6 billion, SES absorbed Intelsat, and Voyager acquired lunar lander maker Astrobotic. Three names are at the center of this race: SpaceX, Blue Origin, and China.

Most people still think of SpaceX as a rocket company, but its latest quarterly results tell a more interesting story. Of $14.6 billion in third-quarter revenue, 52% came from artificial intelligence. SpaceX took on that business when it merged with Elon Musk's xAI (which already owned X) in February, then expanded it in August by acquiring the coding software company Cursor. Starlink contributed 36%, and launch accounted for just 12%.

Figure 5. SpaceX Revenue by Segment, Selected Quarters

Starlink is the profit engine, with 13.6 million consumer subscribers and $2.4 billion in operating income last quarter alone. SpaceX spent $48 billion on capex through the end of Q3, of which 83% is attributable to the AI segment. That split may explain much of the company's valuation, roughly $1.8 trillion at its June IPO and near $2 trillion today. Investors appear to be paying for an AI story as much as a space one.

Blue Origin, Jeff Bezos's rocket company, shows how hard that lead is to replicate. The company has resources few competitors can match and a central role in NASA's lunar plans, yet flew New Glenn only twice in 2025. In April 2026, an upper-stage problem left an AST SpaceMobile satellite in an orbit too low to use, the only BlueBird AST has lost. In May 2026, a New Glenn exploded during a ground test and damaged the company's only pad for the rocket. The rebuilt tower was standing again by late October, and Blue Origin is aiming to fly before year-end. Blue Origin is still early in its development, and dismissing the company would be premature.

China's ambition shows most clearly in its regulatory filings, which seek International Telecommunication Union approval for constellations totaling more than 200,000 satellites. Execution lags well behind those filings. China's two broadband networks hold about 490 satellites in orbit, and the country had no operational reusable rocket as of 2025. Still, China out-launched the United States in military missions last year, 20 to 16, a reminder that this race runs on geopolitical strategy as much as pride.

Figure 6. Satellites in Orbit by Constellation

For all its scale, Starlink's next growth market fits in a pocket. SpaceX wants to connect ordinary smartphones directly to its satellites, and two other contenders are racing to do the same.

Picture an empty stretch of highway in western Kansas with no bars on your phone. Direct-to-device service fills that gap by connecting an ordinary smartphone straight to a satellite overhead. The customer keeps the same phone and the same plan, and nothing extra goes on the roof. Towers are cheap to build where people cluster and expensive where they don't, so the satellite covers what the tower network can’t. That's why carriers want the service, and why all three contenders started by partnering with them.

Starlink reached the market first, and more than 22 million people used its direct-to-cell service in September, all through partner carriers such as T-Mobile in the US. SpaceX is now assembling the pieces to sell phone service on its own. It has bought spectrum from EchoStar and others, received FCC approval this month for up to 15,000 next-generation satellites, and, according to Bloomberg, is in talks for access to at least 80,000 US cell sites. On the company's earnings call, Musk said the goal is for Starlink Mobile to become a "major mobile carrier."

In May, AT&T, T-Mobile, and Verizon responded by agreeing to form a joint venture that would pool their spectrum into one platform open to any satellite operator. In Europe, Deutsche Telekom, Orange, Telefónica, and Vodafone announced a letter of intent on October 19 to bid jointly for the region's satellite spectrum, with a satellite partner still to be chosen, according to the four companies' joint statement. Both groups kept their existing satellite partnerships in place.

AST SpaceMobile takes the opposite approach and sells only through carriers, more than 60 of which, including AT&T, Verizon, and Vodafone, are already partners. Each of its satellites carries an antenna array of roughly 2,400 square feet, which AST says is the largest of any commercial satellite in low Earth orbit. It has 13 in orbit and is targeting initial, intermittent service in the US, Canada, Japan, the UK, and Saudi Arabia before year-end. Launch capacity is the top constraint, because AST builds its own satellites but depends on other companies' rockets, and the next three are waiting in Florida while SpaceX pauses Falcon 9 launches from the state for at least six weeks to prepare for Starship.

Amazon, the third contender, plans to enter in 2028 through its pending purchase of Globalstar, the network behind the iPhone's satellite messaging.

Figure 7. Direct-to-Device Approaches Compared

The clearest interpretation of the carriers' moves is that they want satellite companies as suppliers they can choose from. That structure could favor the operators built to serve carriers, AST most of all. A second theory points the other way, since Starlink already has the users and controls its own launch costs, and carriers outside the US kept launching service with it this year, including SoftBank and NTT Docomo in Japan. Scale of that kind may be hard to route around. The FCC's vote on new satellite-to-phone rules, scheduled for October 29, could tilt either way, because the draft opens another 482 MHz of carrier spectrum to satellites but drops the requirement that satellite operators lease it from carriers.

Several developments will settle the question: AST's launch pace and whether it meets its year-end service target, whether the US carrier venture reaches final terms, who wins Europe's spectrum next year, and how carriers respond as Starlink builds out on the ground. AST reports third-quarter results on November 9, with analyst consensus compiled by MarketBeat at about $47.5 million in revenue.

Phones in dead zones are the part of the space economy closest to everyday life, and the part drawing the most attention. They're also a small slice of what this infrastructure is starting to change.

Much of the space economy's output is consumed without any awareness of where it comes from. The $280 billion in positioning, navigation, and timing services described earlier is the clearest example, and cheaper launch is moving imaging in the same direction, toward satellite pictures frequent and inexpensive enough to assess storm damage before an adjuster reaches the house.

Connectivity is the most visible change, now that Starlink's broadband reaches homes cable never did and airlines and shipping companies buy the same service for their fleets. Defense may be the largest buyer of all, since Space Foundation projects global military space spending will top $150 billion and the proposed Golden Dome missile defense system alone is estimated to cost more than $175 billion.

Incumbents are already losing ground, beginning with satellite television, where revenue fell 8.2% last year, and extending to AT&T, Verizon, and T-Mobile, whose shares slid the morning that reports of SpaceX's tower talks surfaced. Tower owners, by contrast, may gain a new tenant; asked on the company's third-quarter earnings call about leasing to satellite companies, Crown Castle's chief executive said Crown Castle is talking to all parties.

The first challenge is access, since much of this industry's value has been built in private hands. SpaceX was private until June, Blue Origin still is, and many of the companies in Figure 4 are reachable only through venture funding. Public options tend to be either very large or very early, with little in between.

Price is the second challenge, since SpaceX trades at about 63 times its trailing revenue, a multiple that may reflect expectations for its AI business as much as anything in orbit.

The third is capital intensity, illustrated by SpaceX's $48 billion of capital spending in the first nine months of 2026 and by AST, whose second-quarter capital spending ran about 19 times its quarterly revenue and which raised $1 billion in convertible debt in July to keep building. Spending ahead of revenue is normal for infrastructure, and it also means more debt or dilution if timelines slip.

Execution and policy risks complete the list, as AST's year shows. It lost a satellite to one rocket failure and now waits on another company's launch schedule, while the FCC, European regulators, and the rivalry with China can each change the rules midstream.

The theme deserves attention, and position sizes that respect how early it still is. For most investors, that likely means diversified exposure and a conversation with an advisor about how it fits the rest of a portfolio.

In 1966, taxpayers paid for the race, and the prize was a flag on the Moon. Sixty years later, shareholders are paying for this one, and they'll keep the rewards and absorb the losses.

Please read all disclosures carefully before acting on any information contained in this document.

Advisory services offered through NewEdge Advisors, LLC, a registered investment adviser.

Material discussed herewith is meant for general illustration and/or informational purposes only.

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Third-Party Data Attribution

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