2025, a year in space

2025 will be a big year for the space sector. In Europe, Ariane 6 has just successfully completed its first commercial flight, giving Europeans sovereign access to space once again. With the success of the first flight of Blue Origin’s New Glenn in January and the continued progress of SpaceX’s Starship, the space industry is entering a new era of powerful and reusable launch vehicles that are revolutionising access to space. This is also opening up unprecedented astronomical prospects for investors, driven by public and private players determined to write a new chapter in the race to the Moon and Mars.

Favourable momentum

The recovery of space and defence spending will be key in the coming years. Both sectors will benefit from the support of the 47th President of the United States, who, it should be remembered, founded the Space Force, the sixth branch of the US armed forces, during his first term in the White House. Defence companies are well positioned due to the industrial complexity of space activities: they benefit from skilled human resources in addition to government support. The field of space exploration has relied on industrial defence capabilities, with the creation of government space agencies working alongside national defence departments.

The sector’s strong prospects in 2025 will be supported by several drivers, including the acceleration of commercial activities, fuelled by the desire of private players to build low-orbit constellations or prepare future missions to the Moon and Mars. Another key driver for 2025 will be the increase in public funding generated by the race to the Moon and the renewed momentum since the election of Donald Trump, combined with the decline in launch costs, particularly through the reuse of launchers, which is improving the profitability of space activities.

A booming sector

The revival of public funding is being accompanied by the development of private commercial applications and the emergence of true space business models. From manufacturers of rockets, equipment, semiconductors and even rocket design software to communication and Earth observation satellites, the investment universe is constantly expanding with new IPOs. The sector has also matured. Companies that were burning a lot of cash three or four years ago have grown in activity, size and profitability.

The keys to space

In 2025, rocket launches and programme commercialisation will be the keys to space. This is a major trend to which we are exposed, notably through Rocket Lab, SpaceX’s younger sibling, which specialises in small launchers and is developing Neutron, a medium-sized launcher similar to SpaceX’s Falcon 9, Avio, the Italian company specialising in propulsion systems, which produces the Vega rockets (small launchers), and Airbus, whose subsidiary Arianespace has confirmed the ramp-up of Ariane 6 after a first successful commercial launch in March.

The balance is shifting in the aerospace and defence sector. Defence companies are increasingly developing their space activities. The Space Foundation has estimated global military space spending in 2023 at $57 billion, an increase of 18% on 2022,[1] while the World Economic Forum predicts that the space defence sector will reach $250 billion by 2035.[2] European defence conglomerates such as Leonardo, Thales, BAE Systems and Avio are particularly well placed to benefit from the increase in military budgets.

Other key companies in the ecosystem are those developing related technologies essential to the growth of the space industry, such as Nvidia. A key player in the production of chips used to analyse space data, the American leader is now working on installing computing capabilities directly on satellites. Another example is Amazon, whose Kuiper constellation of internet connectivity services is set to become the equivalent of Starlink.

The growth outlook for space is 9% to 10% per year,[3] with some segments expected to grow even faster. This should fuel growth and the potential for a theme that is still opening up new horizons.

Disclaimers: The opinions expressed in this document are the fund manager’s own. LFDE shall not be held liable for these opinions in any way. Any reference to a security or listed company is provided for information purposes only and as such does not constitute an offer to buy or sell a security, investment advice or financial analysis.

[1] Space Foundation, 2024

[2] World Economic Forum, 2024

[3] McKinsey & Company, Space: The $1.8 Trillion Opportunity for Global Economic Growth, Insight report, Avril 2024