Space, The Final Investing Frontier - How AI and Technology Are Expanding the Economy

The Bid - An Investing Podcast from BlackRock

Host Oscar Pulido and BlackRock's Reid Menge explore the transition of the space economy from government-led exploration to a commercialized

Key takeaways

• Launch costs have plummeted from $54,000 per kilogram during the NASA shuttle era to approximately $3,000 per kilogram via SpaceX's Falcon 9.
• The development of SpaceX's Starship aims to further reduce launch costs to as low as $200 per kilogram.
• Satellite technology has shifted from massive, expensive units to 'toaster-sized' satellites that cost significantly less to deploy.
• Space is becoming a critical component for AI scalability, with the potential for orbital data centers to solve Earth-based power and cooling constraints.
• The U.S. Space Force represents a growing national security priority, with space-related defense budgets expected to rise significantly.

Main topics

• Space economy evolution
• Launch cost reduction
• Satellite miniaturization

Notable quotes

AI is making space more valuable. And then space is going to make AI more scalable.

Conclusion

The space economy is entering a transformative phase where technologic

Transcript preview

Speaker 6 (0:00) All systems check. Engines are green for ignition. Speaker 6 (0:30) For decades, space was largely associated with government programs, scientific exploration, and the occasional moonshot. But today, much of the global economy already relies on infrastructure in orbit, from communications and navigation to weather forecasting and the data that powers businesses around the world. Speaker 5 (0:50) There's, as we speak, 30 U.S. government GPS satellites circling above us. We've gotten now down to the point where you can create a satellite the size of a toaster. Speaker 6 (1:00) Now, a combination of technological advances, falling costs, growing private sector involvement, national security priorities, and the rise of artificial intelligence could be pushing the space economy into a new phase. So is space moving from something that feels futuristic to a much more tangible economic and investment theme? Welcome to The Bit. where we break down what's happening in the markets and explore the forces changing the economy and finance. I'm Oscar Pulido. Today, I'm joined by Reid Mengi, Portfolio Manager in BlackRock's Fundamental Equity Group. We'll look at what's driving the growth of the space economy, how AI and national security are reshaping the industry, where economic opportunities may be emerging, and what investors should be watching as this market develops. Speaker 6 (1:57) Reid, thank you so much for joining us on The Bit. Speaker 5 (1:59) Thanks, Oscar. Speaker 6 (2:00) Appreciate the opportunity. Well, Reid, we're here to talk about space and the space economy. Of course, when people think about space or hear about space, I think they think about things like rockets and astronauts and exploration. And I think about when I was in school, we used to go to the planetarium and we'd sit there and we'd look up at the stars and learn about astronomy. But it turns out that space already plays a pretty significant role. in our everyday lives from an economic perspective. So why don't we start there? What does the space economy actually look like today? And where are we already relying on it? Speaker 5 (2:36) That's right, Oscar. If you mention it to most people, they'll probably think of some of the greatest moments in American history, or they'll think about maybe a Ron Howard film. You say the word space to an investor, you probably get a blank stare. The topic for investors, I would say, is relatively new. And really, that was SpaceX, the IPO this past summer, the spectacular IPO, which put it on the radar for investors. The Speaker 1 (2:58) space and AI firm has officially made history on its $75 billion IPO, debuting with a market value of $1.7 trillion ahead. Speaker 3 (3:07) SpaceX shares store in tonight's what's been called Wall Street's biggest initial public offering of stock. Shares opened at $150 before finishing the day just below $161. Speaker 5 (3:18) But you ask a good question, you know, where is it today in your lives? And really, the answer is that it's everywhere. From the government's perspective, space is heavily involved in U.S. defense, national security. There's, as we speak, 30 U.S. government GPS satellites circling above us. They're doing more than just positioning planes and ships. They're also helping Uber figure out where you are and where your driver is. So there's a lot of commercial applications and on top of just weather forecasting, increasingly we're seeing precision agriculture. And so space really is a very important topic that's emerging in both the government and in the civilian world as well. And this is where you're seeing this emergence of the data center in space. So just framing it, space has been about exploration, national exploration. It's in the current stage of satellites. But what we're moving into is space being about the commercialization opportunities. data centers floating 15,000 miles above us in the not too distant future. Speaker 6 (4:14) So, Reid, you mentioned how space already has some relevance in our everyday lives. You mentioned satellites, and that's how we think about things like knowing what the weather is going to be like. And there are governments that use it from a national defense perspective. So it's relevant. But why does it feel like space is having more of a moment right now? Why is it rising in importance? You mentioned SpaceX and the IPO. But maybe just elaborate, why is it becoming more of a popular topic? Speaker 5 (4:40) Great question, Oscar. It's two C's and a D. Cost, capability, and demand. And we'll start with the cost piece. Historically, to get mass to orbit, it would cost about $54,000 per kilogram. So when you see those NASA space shuttles, that's basically what it's costing to get a kilogram to orbit, about $54,000. Speaker 5 (5:06) And that was U.S. government for decades. You had the private sector for the past decade create a lot of innovations in this industry where SpaceX in particular with the Falcon 9 rocket has gotten that number from 54,000 down to about 3,000 per kilogram to orbit. The next step is going to be the Starship. This is the fully reusable rocket that SpaceX is working on. Starship is about 100 feet taller than the Statue of Liberty. It's absolutely enormous. The promise with Starship is getting that cost curve down even further, down from $3,000 per kilogram down to about $200. At that point, you're going to be able to create all new companies, all new sub-industries of space, new opportunities. This topic is all about how cheaply can you get mass to orbit. Speaker 5 (5:56) The analogy, Oscar, would be if United Airlines had to throw away a plane every time it flew from San Francisco to New York, it'd be a very expensive plane ticket. So that's the goal of SpaceX, to really bring down the cost to get mass to orbit. And at the end of the day, that's the first piece we've got to solve, the reusability of rockets. The second C is capability. And what I mean by that is the satellites are becoming much smaller, much cheaper. than historically the world's ever seen. So it used to be that a communications satellite that operated in the geo-orbit would cost about $500 million, be the size of a school bus, and weigh as much as an elephant. That's what the world's been relying upon for the past few decades for communications satellites. We've gotten now down to the point where you can create a satellite the size of a toaster. And