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The Bid is BlackRock’s investment podcast where investment professionals break down what’s happening in the world of investing and explores the forces changing the economy and finance. From stock market outlooks to geopolitics and technology, BlackRock speaks to thought leaders and industry experts from about biggest trends moving markets.

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

The space economy is moving closer to everyday economic life as falling launch costs, smaller satellites, AI demand and national security priorities reshape the industry. Reid Menge joins The Bid to examine the technologies, infrastructure and emerging commercial uses influencing this developing market.

272. Space: The Final Investing Frontier - How AI and Technology Are Expanding the Economy

Web title: The Space Economy: How AI and Technology Are Expanding Markets

Full Episode Description

The space economy is becoming more connected to everyday economic activity, from satellite communications and navigation to weather forecasting, defense and data. Falling launch costs, advances in satellite technology and rising demand for AI infrastructure are broadening the conversation around what space could enable.

In this episode of The Bid, host Oscar Pulido speaks with Reid Menge, portfolio manager in BlackRock’s Fundamental Equity Group, about how the space economy is developing and the forces behind its growing relevance. They explore lower launch costs, satellite capabilities, national security priorities, AI infrastructure and the potential evolution of data centers.

The discussion also looks beyond rockets and satellites to the broader infrastructure and capital markets ecosystem supporting space activity. Reid explains why cost and capability remain critical variables, how government spending can intersect with private-sector innovation, and why technical execution remains an important source of uncertainty as the industry develops.

Key insights:

How falling launch costs could expand the range of economically viable space activities.

Why smaller, lower-cost satellites are changing communications and Earth observation.

How AI is increasing the potential value of data collected from space.

Where national security priorities intersect with commercial space infrastructure.

Why semiconductors, communications equipment and specialty materials form part of the space ecosystem.

How execution risk and technological complexity could influence the industry’s development.

Sources: GPS.gov data 2026; How geostationary small satellites are providing strategic access to space, WEF 2025; Big ideas, small satellites, NASA Jet Propulsion Laboratory; State-of-the-Art Small Spacecraft Technology NASA report May, 2026; Department of War Budget 2027; Servers account for 60% of the total cost of ownership of a one-gigawatt AI data center, Epoch AI; SpaceX IPO: Musk's firm set to launch first 'orbital data center' AI1 satellites in 2027, will put compute on Starlink craft DCD 2026; Department of the Air Force Posture Statement Fiscal Year 2027;

Keywords: space economy, AI investing, infrastructure, capital markets, megaforces, satellite technology, national security, data centers

Written Disclosures In Episode Description:

This content is for informational purposes only and is not an offer or a solicitation. Reliance upon information in this material is at the sole discretion of the listener. Reference to any company or investment strategy mentioned is for illustrative purposes only and not investment advice. In the UK and non-European Economic Area countries, this is authorized and regulated by the Financial Conduct Authority. In the European Economic Area, this is authorized and regulated by the Netherlands Authority for the Financial Markets. For full disclosures, visit blackrock.com/corporate/compliance/bid-disclosures.

<<TRANSCRIPT>>

Oscar Pulido: 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. 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 Bid, 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 Menge, 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

Reid, thank you so much for joining us on The Bid

Reid Menge: Thanks, Oscar. Appreciate the opportunity.

Oscar Pulido: 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?

Reid Menge: 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. And we're all trying to get as smart as fast as possible. So, you ask a good question, where is it today in your lives? And answer is that it's everywhere. From the government's perspective, space is heavily involved in US defense, national security. There's, as we speak, thirty US government GPS satellites, circling above us.[SM1]  And 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 and, 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, which I'm sure we'll talk about later on, 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 and data centers floating fifteen thousand miles above us in the not too distant future.

Oscar Pulido: 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's 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 again, maybe just elaborate. why is it becoming more of a popular topic?

Reid Menge: Great question, Oscar. It's the two Cs and a D. So 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.[SM2]  So, when you see those NASA space shuttles, that's basically what it's costing to get a, a kilogram to orbit, about $54,000.

And that was US government for decades, that got to that point. You had the private sector over 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. To give you an idea, Oscar, 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. And 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. 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 communication satellite that operated in the geo orbit would basically 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 communication satellites.

We've gotten now down to the point where you can create a satellite the size of a toaster, and they don't cost $500 million. They cost $100,000, and that price is coming down even further. So, I'd say the advancements in the satellites over the past decade has really enabled all new opportunities, new businesses to come about because the cost and the size factor is creating new industries and new businesses.

And the third is demand. Governments around the world just increasingly view space as a national strategic priority. the United States created its first new armed, national service since 1947 with the US Space Force back in 2019. But this is a critical new piece of national defense. It's going to be about 5% of the defense budget next year. So, the US government's pumping a lot of money into the US Space Force for obvious reasons, military communications, surveillance, enemy missile detection. And so, it kind of starts there with the extent to which the government is really leaning in on space. And then there's commercial opportunities too. again, those flights from San Francisco to New York, hopefully you get the internet on that plane. To me, it works 50% of the time, but that's the hope, that you can get the internet to work as you're flying for five hours. one of the things, Oscar, I'm super excited for is direct-to-device, cellular communications. And what this basically means is when you land at Newark, your phone works because it's connecting to a satellite, not to a cell tower.

And, to me, it feels like half the time, my phone's not working. It doesn't matter where you are in America, unless you're in a major city these days, the phone signal's very spotty. And so, the promise is we're going to be able to get our phone signals from satellites. like satellite radio, it just works So I'm super excited for the prospect for direct-to-device satellite cellular communications. I mentioned kind of the, these small toaster-sized satellites. There are companies like Planet Labs, which literally are spinning these around the Earth, mapping the entire, every, every square inch of the Earth every day. And for areas where there's particular interest, either for commercial or military reasons, they can take a same picture of that spot 10 times a day. That's because the satellites have gone from the size of trucks down to the size of a toaster.

It's a flywheel, by the way, as more of this money from the government's being spent, in the space industry, it's, almost acting like venture capital where you're creating innovations, you're reducing that cost to orbit, smaller satellites. It's creating new businesses, new industries. super interesting time

Oscar Pulido: I think you've framed it really nicely in terms of there's two Cs and a D. and the first C, you mentioned cost, and, when you first said that the cost of taking mass to space has gone from $54,000 a kilogram to $3,000 a kilogram, I thought, that's a massive move already. But you said it, it's potentially going even lower than that.

And certainly, cost as an input for any economic decision is going to have a big impact on whether, the space economy becomes more relevant. Let's talk about artificial intelligence, which is one of those forces that is, helping space to have its moment, and you've alluded to data centers in space. We've talked a lot about artificial intelligence and the impact that it's having on industries here on planet Earth. But maybe talk more about, why the space economy is interconnected to the artificial intelligence build-out.

Reid Menge: great question, Oscar, because what's happening is AI is making space more valuable, and then space is going to make AI more scalable.

So, we'll start with the first piece there. What AI really wants is data. You want to train your models with the most data possible. As I mentioned before, there's companies who are literally photographing the Earth every square inch, every day, creating tons of data. That was just a data repository years ago, and now you can use AI if you're a hedge fund, you're an insurance company, you're an agriculture company, you're a government that wants to look at deforestation. There are so many ways you can use that data now and apply AI to it, to create a lot of value.

So, AI is making this data from space incrementally more valuable. But then space is going to make AI more scalable, and what I mean by that is the problem with AI on, on Earth right now is the need for power and the need for land and the need for water and the need for governments to cooperate and the need for US citizens and global citizens to cooperate, building data centers in their backyards.

And these are problems. There are a lot of problems and a slowdown potentially of can we build the data center capacity we need due to all these pending issues? For some of these issues, orbits... The Earth orbit is where to put a data center because you're not dealing with, governments or neighbors. You've got power, you got cooling. And this is the vision that the data centers that we currently see being built out in Texas and in Europe and in Virginia. Next decade we'll start to see the incremental capacity going into orbit. So, it's amazing time right now.

Oscar Pulido: It would sound pretty complicated to launch a data center into space, and that presumably it should be easier to solve for that on Earth. But as you're pointing out, there's a lot of stakeholders involved in getting that data center approved in terms of land and where to put it, and I'm thinking a little bit about the BII, midyear outlook.

When we talked to Jean Boivin, one of the big themes of that outlook is this theme of scarcity versus abundance, and the scarcity point has to do with the scarcity of natural resources and other materials and minerals that are required in terms of building a data center. is there anything else you would point to that is an interesting contrast between the difficulty of building the data center on Earth versus launching it into space?

Reid Menge: Really, it's about time to power. That's what the AI companies are primarily concerned about. That simple sentence: time to power. The chips are becoming much more abundant. Factories around the world are pumping out the components and whatever shortages we see in 2026, it gets resolved over time. But this time to power issue is the problem. The US grid, frankly, global energy grids were not designed to provide power at the speed at which companies would love to expand their AI compute capacity. So, time to power, that's the problem.

The other problem is capital, Oscar. So, if you think about, what's happening with, the construction of a data center, it costs about $50 billion to create one gigawatt of AI compute. And if you break down the 50 billion, that's about $30 billion of compute, IT infrastructure, and then about $20 billion of everything else. the power, the cooling, the land, the shell, the labor. So, it's not just an issue of can we get the power? It's also, can we build these more efficiently and cheaply? And as you bring down the cost curve of getting that one gigawatt of compute live, your returns go up. So, there's an incentive to reduce the cost, reduce the 50 billion. And if you think about if we can put a gigawatt of AI compute in space, primarily you're attacking that $20 billion piece. The compute stays the same, the compute cost, but the power piece, that gets reduced because you go from relying on a grid or turbines or fuel cells, to solar panels. And by the way, the solar generation in space is about five times more efficient than on Earth. Solar to power AI compute makes a ton of sense.

Cooling. Cooling's a major problem, Oscar, for data centers. Literally they have to build these tunnels and liquid cool, and this is a very big architectural problem to think about how do you build a future data center. But there's no problem in space with cooling because you use the vacuum of space to cool those chips. It seems like it's crazy to put a server with, a, with some NVIDIA chips on it into orbit, but it actually makes all the sense in the world. And where there's an economic incentive to do something, people will figure it out. And so, from a timing perspective, there's going to be the first real demonstration of this concept of a server running AI compute in space probably Q4 of 2027. That's SpaceX's target timeline to show us that first proof of concept with scale in 2028, clearly, but that'll be the first time we'll see that first demonstration of a server in space.

Oscar Pulido: As you're talking about this, it all sounds so futuristic and conceptual but now you're putting some dates around when we will actually see some of this in practice, and those dates are really not too far in the future.

Reid, when we talked about why space is having its moment right now or why it's rising in relevance, you, you touched on national security and defense spending and the role that governments play. We actually spoke to your colleague, Rolf Heitmeyer, about this topic of defense investing and how governments are spending more time here. Can you talk about the importance of space to national security again, and where do government priorities intersect with some of the commercial priorities that technology companies might have?

Reid Menge: Sure. what's been really interesting to watch over the past few years, is space is becoming as important to control as the land and sea. This is, this is modern warfare, Oscar. governments want, satellites for s- secure communications and for surveillance. there's increasingly a view of you need to control space, and there's concerns, frankly, about, potential foreign adversaries, targeting satellites in space. those GPS satellites I mentioned earlier, how vulnerable are they? And only 30 of them. and so, the inability to keep those in the air would be devastating. And is why the US Space Force was created. This is why the budget's going up 100% next year because the US, and every government frankly feels this way, you need to control space this is modern warfare. This is the new Star Wars in orbit.

You mentioned, the marriage of these two worlds. This money that's going in from the government into the commercial space industry is really funding the R&D better rockets, better satellites, better communication equipment. And so, it's a very symbiotic relationship, where it's bringing down the cost of the private sector. At the same time, the, the governments around the world are benefiting from, from better optimized space infrastructure.

Oscar Pulido: And so, Reid, if we think about the space economy as a bit of an ecosystem from, rockets, launching into space, satellites, we're talking about the different component parts and infrastructure that are required. You mentioned data centers. where do you see the most significant areas of economic opportunity emerging today and how does that opportunity set change over time?

Reid Menge: Very simply, I would just start with the picks and shovels. All of these satellites take semiconductors. they take communication equipment, lasers, rocket componentry, specialty materials - the need to have materials that can withstand high heat levels.

I would then next talk about, the services. What are we going to see emerge? If more stuff gets into orbit, what does that enable? And I mentioned earlier this concept of new industries that can form when you've got very cheap form factors getting to space cheaply. Earth observation, but weather, mapping, any, any value of having images of the Earth. There are all sorts of industries that would love to get access to that data. The services that are going to emerge, I think are going to be very interesting businesses. Not to mention the companies that have to service just the space, economy. So, there's going to be a lot of orbital debris. We're going to have to clean that up. Things we're not even thinking about right now, Oscar.

And then of course, the data center in space topic. it's highly profound to think about, next decade, if all the compute capacity, for AI training goes into orbit, how does that change the outlook for the Magnificent Seven? How does that change the outlook for the major frontier labs? Who's got a play right now in, in space? Who's making the moves right now in the year twenty twenty-six to ensure that they've got, access to space? There are very few companies, by the way.

And so, it's one of the things I'm watching very keenly is which companies are making the right moves right now to be positioned if this data center and space concept is where the, the incremental compute is next decade, who gets left behind and who's very well positioned for that.

Oscar Pulido: It sounds like there's a more immediate and perhaps more obvious, investment opportunity set that you can look at. You mentioned the picks and shovels, the, the materials, the component parts, the semis. But the second and third order effects are less known right now, but something that will evolve over time and an area that, that you can monitor and that investors can take advantage of.

And so, speaking of investors, I think if they're listening to this, Reid, they're perhaps still trying to wrap their mind around this evolving economy that is going on in space, and maybe they think it sounds a little bit like science fiction, which I wouldn't blame them. But what do you think they may be missing? And on the other side of that, what are the risks or uncertainties they're right to be cautious about?

Reid Menge: It's a great question, Oscar, because I would just go back to the two Cs that we started with: cost and capability. Investors or anybody listening to this podcast should not underestimate, what happens when the cost of a kilogram of mass to orbit goes from $54,000 to $200. And the satellite that goes to orbit is not the size of a school bus with the wingspan of a 737, but it's the size of a toaster. That's the structural change that is enabling what we're seeing right now with the space economy in the year 2026. The risks, however, are enormous. I've talked to executives, Oscar, that have tried to downplay space. What I have learned looking at the space now, for about a decade, is that space is really hard, meaning the risk profile of space companies, are higher than you think. In other words, the world's wealthiest, smartest people right now are trying to figure this out with varying levels of success.

Some companies are getting into orbit, some companies are blowing up on the launchpad as we speak. These are the world's smartest minds with endless capital. So, space is really hard. I remember one executive telling me, Oh, no, it's okay. A rocket is nothing more than a tin can with a fuse at the end. And that company never got to orbit. I eagerly watch the SpaceX launches, which they now live stream, to see how they're doing. I look at the competitors. But I would just leave you with space is hard. All this sounds, you're right, science fiction. and the actual movie where there's a happy ending, it's going to take a lot of hard work and a lot of failure along the way.

Oscar Pulido: Execution is difficult. Like you said, there's a lot of smart people trying to do this, and it makes the role of an investor perhaps really important here to identify the correct opportunities.

Reid, if we were to fast-forward, and let's say we're having this conversation again 10 years from now, which at the rate things are changing, I can only imagine what 10 years is going to look like.

But, if we were having that conversation, what developments in the space economy do you think would make your expectations today look conservative, and what should we be watching between now and then?

Reid Menge: Yes, Oscar, it's going to come down to how quickly can the industry come down that cost curve of getting mass to orbit. We're going to start there. If it's faster than expected, we're going to have a much larger space economy. If it's slower because the reusability of the rockets is more challenging than expected, the space economy gets pushed out. So, we'll start there, the pace at which this happens, that they can bring down the cost curve. The second piece would be just watching where is incremental AI compute built next decade. Are we still building in Texas in the year 2031, or is it in orbit? Based on those two answers is going to be dependent or is going to drive, I should say, the success of what this industry's building towards.

To me, Oscar, space feels like the early days of the internet, where, somebody had the concept, ‘What if we just networked people together? Wouldn't that be a great idea! That was the internet. And that got built but nobody could have foreseen the smartphone, social networking, cloud computing, all these things that came out of the basic concept of just connect people, network the world. It created arguably today's largest companies and industries from that simple idea. So, I think about the next decade, the mid-2030s is, who are the new trillion-dollar companies that are leveraging the ability to get to space cheaply and reliably, and it's going to be an amazing decade.

Oscar Pulido: It does feel like, some other, some new movies are going to come out of these next five or 10 years as the space economy, evolves.

Reid, you said an, a lot of interesting things, and I was just thinking back to some of the things you said. You said mass to orbit and the cost of that. you mentioned time to power and the importance that plays for, the builder of a data center. You mentioned two Cs and a D, which is a good framework to think about why the space economy is, becoming more relevant.

I can confirm that you and I had this conversation on Earth, when we were talking about space, but at this rate, in 10 years, we might be in space and instead talking about the economy back on Earth. I'll check in with you and see if that prediction comes true. Reid, thanks for sharing all these insights, and thanks for doing it here on The Bid

Reid Menge: Thanks, Oscar.

Oscar Pulido: Thanks for listening to this episode of The Bid. Next up, I'm speaking with Jay Jacobs about the AI economy and whether we're entering into a new investing phase of the AI story. Make sure to subscribe to The Bid and follow us on social media so you don't miss the episode.

<<SPOKEN DISCLOSURES>>

This content is for informational purposes only and is not an offer or a solicitation. Reliance upon information in this material is at the sole discretion of the listener. Reference to the names of each company mentioned is merely for explaining the investment strategy and should not be construed as investment advice or recommendation. In the UK and Non-European Economic Area countries, this is authorized and regulated by the Financial Conduct Authority. In the European Economic Area, this is authorized and regulated by the Netherlands Authority for the Financial Markets. For full disclosures, visit blackrock.com/corporate/compliance/bid-disclosures

MKTG0926-H-5935933-EXP0927

272. Space: The Final Investing Frontier - How AI and Technology Are Expanding the Economy

Web title: The Space Economy: How AI and Technology Are Expanding Markets

Full Episode Description

The space economy is becoming more connected to everyday economic activity, from satellite communications and navigation to weather forecasting, defense and data. Falling launch costs, advances in satellite technology and rising demand for AI infrastructure are broadening the conversation around what space could enable.

In this episode of The Bid, host Oscar Pulido speaks with Reid Menge, portfolio manager in BlackRock’s Fundamental Equity Group, about how the space economy is developing and the forces behind its growing relevance. They explore lower launch costs, satellite capabilities, national security priorities, AI infrastructure and the potential evolution of data centers.

The discussion also looks beyond rockets and satellites to the broader infrastructure and capital markets ecosystem supporting space activity. Reid explains why cost and capability remain critical variables, how government spending can intersect with private-sector innovation, and why technical execution remains an important source of uncertainty as the industry develops.

Key insights:

How falling launch costs could expand the range of economically viable space activities.

Why smaller, lower-cost satellites are changing communications and Earth observation.

How AI is increasing the potential value of data collected from space.

Where national security priorities intersect with commercial space infrastructure.

Why semiconductors, communications equipment and specialty materials form part of the space ecosystem.

How execution risk and technological complexity could influence the industry’s development.

Sources: GPS.gov data 2026; How geostationary small satellites are providing strategic access to space, WEF 2025; Big ideas, small satellites, NASA Jet Propulsion Laboratory; State-of-the-Art Small Spacecraft Technology NASA report May, 2026; Department of War Budget 2027; Servers account for 60% of the total cost of ownership of a one-gigawatt AI data center, Epoch AI; SpaceX IPO: Musk's firm set to launch first 'orbital data center' AI1 satellites in 2027, will put compute on Starlink craft DCD 2026; Department of the Air Force Posture Statement Fiscal Year 2027;

Keywords: space economy, AI investing, infrastructure, capital markets, megaforces, satellite technology, national security, data centers

Written Disclosures In Episode Description:

This content is for informational purposes only and is not an offer or a solicitation. Reliance upon information in this material is at the sole discretion of the listener. Reference to any company or investment strategy mentioned is for illustrative purposes only and not investment advice. In the UK and non-European Economic Area countries, this is authorized and regulated by the Financial Conduct Authority. In the European Economic Area, this is authorized and regulated by the Netherlands Authority for the Financial Markets. For full disclosures, visit blackrock.com/corporate/compliance/bid-disclosures.

<<TRANSCRIPT>>

Oscar Pulido: 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. 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 Bid, 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 Menge, 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

Reid, thank you so much for joining us on The Bid

Reid Menge: Thanks, Oscar. Appreciate the opportunity.

Oscar Pulido: 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?

Reid Menge: 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. And we're all trying to get as smart as fast as possible. So, you ask a good question, where is it today in your lives? And answer is that it's everywhere. From the government's perspective, space is heavily involved in US defense, national security. There's, as we speak, thirty US government GPS satellites, circling above us.[SM1]  And 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 and, 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, which I'm sure we'll talk about later on, 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 and data centers floating fifteen thousand miles above us in the not too distant future.

Oscar Pulido: 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's 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 again, maybe just elaborate. why is it becoming more of a popular topic?

Reid Menge: Great question, Oscar. It's the two Cs and a D. So 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.[SM2]  So, when you see those NASA space shuttles, that's basically what it's costing to get a, a kilogram to orbit, about $54,000.

And that was US government for decades, that got to that point. You had the private sector over 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. To give you an idea, Oscar, 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. And 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. 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 communication satellite that operated in the geo orbit would basically 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 communication satellites.

We've gotten now down to the point where you can create a satellite the size of a toaster, and they don't cost $500 million. They cost $100,000, and that price is coming down even further. So, I'd say the advancements in the satellites over the past decade has really enabled all new opportunities, new businesses to come about because the cost and the size factor is creating new industries and new businesses.

And the third is demand. Governments around the world just increasingly view space as a national strategic priority. the United States created its first new armed, national service since 1947 with the US Space Force back in 2019. But this is a critical new piece of national defense. It's going to be about 5% of the defense budget next year. So, the US government's pumping a lot of money into the US Space Force for obvious reasons, military communications, surveillance, enemy missile detection. And so, it kind of starts there with the extent to which the government is really leaning in on space. And then there's commercial opportunities too. again, those flights from San Francisco to New York, hopefully you get the internet on that plane. To me, it works 50% of the time, but that's the hope, that you can get the internet to work as you're flying for five hours. one of the things, Oscar, I'm super excited for is direct-to-device, cellular communications. And what this basically means is when you land at Newark, your phone works because it's connecting to a satellite, not to a cell tower.

And, to me, it feels like half the time, my phone's not working. It doesn't matter where you are in America, unless you're in a major city these days, the phone signal's very spotty. And so, the promise is we're going to be able to get our phone signals from satellites. like satellite radio, it just works So I'm super excited for the prospect for direct-to-device satellite cellular communications. I mentioned kind of the, these small toaster-sized satellites. There are companies like Planet Labs, which literally are spinning these around the Earth, mapping the entire, every, every square inch of the Earth every day. And for areas where there's particular interest, either for commercial or military reasons, they can take a same picture of that spot 10 times a day. That's because the satellites have gone from the size of trucks down to the size of a toaster.

It's a flywheel, by the way, as more of this money from the government's being spent, in the space industry, it's, almost acting like venture capital where you're creating innovations, you're reducing that cost to orbit, smaller satellites. It's creating new businesses, new industries. super interesting time

Oscar Pulido: I think you've framed it really nicely in terms of there's two Cs and a D. and the first C, you mentioned cost, and, when you first said that the cost of taking mass to space has gone from $54,000 a kilogram to $3,000 a kilogram, I thought, that's a massive move already. But you said it, it's potentially going even lower than that.

And certainly, cost as an input for any economic decision is going to have a big impact on whether, the space economy becomes more relevant. Let's talk about artificial intelligence, which is one of those forces that is, helping space to have its moment, and you've alluded to data centers in space. We've talked a lot about artificial intelligence and the impact that it's having on industries here on planet Earth. But maybe talk more about, why the space economy is interconnected to the artificial intelligence build-out.

Reid Menge: great question, Oscar, because what's happening is AI is making space more valuable, and then space is going to make AI more scalable.

So, we'll start with the first piece there. What AI really wants is data. You want to train your models with the most data possible. As I mentioned before, there's companies who are literally photographing the Earth every square inch, every day, creating tons of data. That was just a data repository years ago, and now you can use AI if you're a hedge fund, you're an insurance company, you're an agriculture company, you're a government that wants to look at deforestation. There are so many ways you can use that data now and apply AI to it, to create a lot of value.

So, AI is making this data from space incrementally more valuable. But then space is going to make AI more scalable, and what I mean by that is the problem with AI on, on Earth right now is the need for power and the need for land and the need for water and the need for governments to cooperate and the need for US citizens and global citizens to cooperate, building data centers in their backyards.

And these are problems. There are a lot of problems and a slowdown potentially of can we build the data center capacity we need due to all these pending issues? For some of these issues, orbits... The Earth orbit is where to put a data center because you're not dealing with, governments or neighbors. You've got power, you got cooling. And this is the vision that the data centers that we currently see being built out in Texas and in Europe and in Virginia. Next decade we'll start to see the incremental capacity going into orbit. So, it's amazing time right now.

Oscar Pulido: It would sound pretty complicated to launch a data center into space, and that presumably it should be easier to solve for that on Earth. But as you're pointing out, there's a lot of stakeholders involved in getting that data center approved in terms of land and where to put it, and I'm thinking a little bit about the BII, midyear outlook.

When we talked to Jean Boivin, one of the big themes of that outlook is this theme of scarcity versus abundance, and the scarcity point has to do with the scarcity of natural resources and other materials and minerals that are required in terms of building a data center. is there anything else you would point to that is an interesting contrast between the difficulty of building the data center on Earth versus launching it into space?

Reid Menge: Really, it's about time to power. That's what the AI companies are primarily concerned about. That simple sentence: time to power. The chips are becoming much more abundant. Factories around the world are pumping out the components and whatever shortages we see in 2026, it gets resolved over time. But this time to power issue is the problem. The US grid, frankly, global energy grids were not designed to provide power at the speed at which companies would love to expand their AI compute capacity. So, time to power, that's the problem.

The other problem is capital, Oscar. So, if you think about, what's happening with, the construction of a data center, it costs about $50 billion to create one gigawatt of AI compute. And if you break down the 50 billion, that's about $30 billion of compute, IT infrastructure, and then about $20 billion of everything else. the power, the cooling, the land, the shell, the labor. So, it's not just an issue of can we get the power? It's also, can we build these more efficiently and cheaply? And as you bring down the cost curve of getting that one gigawatt of compute live, your returns go up. So, there's an incentive to reduce the cost, reduce the 50 billion. And if you think about if we can put a gigawatt of AI compute in space, primarily you're attacking that $20 billion piece. The compute stays the same, the compute cost, but the power piece, that gets reduced because you go from relying on a grid or turbines or fuel cells, to solar panels. And by the way, the solar generation in space is about five times more efficient than on Earth. Solar to power AI compute makes a ton of sense.

Cooling. Cooling's a major problem, Oscar, for data centers. Literally they have to build these tunnels and liquid cool, and this is a very big architectural problem to think about how do you build a future data center. But there's no problem in space with cooling because you use the vacuum of space to cool those chips. It seems like it's crazy to put a server with, a, with some NVIDIA chips on it into orbit, but it actually makes all the sense in the world. And where there's an economic incentive to do something, people will figure it out. And so, from a timing perspective, there's going to be the first real demonstration of this concept of a server running AI compute in space probably Q4 of 2027. That's SpaceX's target timeline to show us that first proof of concept with scale in 2028, clearly, but that'll be the first time we'll see that first demonstration of a server in space.

Oscar Pulido: As you're talking about this, it all sounds so futuristic and conceptual but now you're putting some dates around when we will actually see some of this in practice, and those dates are really not too far in the future.

Reid, when we talked about why space is having its moment right now or why it's rising in relevance, you, you touched on national security and defense spending and the role that governments play. We actually spoke to your colleague, Rolf Heitmeyer, about this topic of defense investing and how governments are spending more time here. Can you talk about the importance of space to national security again, and where do government priorities intersect with some of the commercial priorities that technology companies might have?

Reid Menge: Sure. what's been really interesting to watch over the past few years, is space is becoming as important to control as the land and sea. This is, this is modern warfare, Oscar. governments want, satellites for s- secure communications and for surveillance. there's increasingly a view of you need to control space, and there's concerns, frankly, about, potential foreign adversaries, targeting satellites in space. those GPS satellites I mentioned earlier, how vulnerable are they? And only 30 of them. and so, the inability to keep those in the air would be devastating. And is why the US Space Force was created. This is why the budget's going up 100% next year because the US, and every government frankly feels this way, you need to control space this is modern warfare. This is the new Star Wars in orbit.

You mentioned, the marriage of these two worlds. This money that's going in from the government into the commercial space industry is really funding the R&D better rockets, better satellites, better communication equipment. And so, it's a very symbiotic relationship, where it's bringing down the cost of the private sector. At the same time, the, the governments around the world are benefiting from, from better optimized space infrastructure.

Oscar Pulido: And so, Reid, if we think about the space economy as a bit of an ecosystem from, rockets, launching into space, satellites, we're talking about the different component parts and infrastructure that are required. You mentioned data centers. where do you see the most significant areas of economic opportunity emerging today and how does that opportunity set change over time?

Reid Menge: Very simply, I would just start with the picks and shovels. All of these satellites take semiconductors. they take communication equipment, lasers, rocket componentry, specialty materials - the need to have materials that can withstand high heat levels.

I would then next talk about, the services. What are we going to see emerge? If more stuff gets into orbit, what does that enable? And I mentioned earlier this concept of new industries that can form when you've got very cheap form factors getting to space cheaply. Earth observation, but weather, mapping, any, any value of having images of the Earth. There are all sorts of industries that would love to get access to that data. The services that are going to emerge, I think are going to be very interesting businesses. Not to mention the companies that have to service just the space, economy. So, there's going to be a lot of orbital debris. We're going to have to clean that up. Things we're not even thinking about right now, Oscar.

And then of course, the data center in space topic. it's highly profound to think about, next decade, if all the compute capacity, for AI training goes into orbit, how does that change the outlook for the Magnificent Seven? How does that change the outlook for the major frontier labs? Who's got a play right now in, in space? Who's making the moves right now in the year twenty twenty-six to ensure that they've got, access to space? There are very few companies, by the way.

And so, it's one of the things I'm watching very keenly is which companies are making the right moves right now to be positioned if this data center and space concept is where the, the incremental compute is next decade, who gets left behind and who's very well positioned for that.

Oscar Pulido: It sounds like there's a more immediate and perhaps more obvious, investment opportunity set that you can look at. You mentioned the picks and shovels, the, the materials, the component parts, the semis. But the second and third order effects are less known right now, but something that will evolve over time and an area that, that you can monitor and that investors can take advantage of.

And so, speaking of investors, I think if they're listening to this, Reid, they're perhaps still trying to wrap their mind around this evolving economy that is going on in space, and maybe they think it sounds a little bit like science fiction, which I wouldn't blame them. But what do you think they may be missing? And on the other side of that, what are the risks or uncertainties they're right to be cautious about?

Reid Menge: It's a great question, Oscar, because I would just go back to the two Cs that we started with: cost and capability. Investors or anybody listening to this podcast should not underestimate, what happens when the cost of a kilogram of mass to orbit goes from $54,000 to $200. And the satellite that goes to orbit is not the size of a school bus with the wingspan of a 737, but it's the size of a toaster. That's the structural change that is enabling what we're seeing right now with the space economy in the year 2026. The risks, however, are enormous. I've talked to executives, Oscar, that have tried to downplay space. What I have learned looking at the space now, for about a decade, is that space is really hard, meaning the risk profile of space companies, are higher than you think. In other words, the world's wealthiest, smartest people right now are trying to figure this out with varying levels of success.

Some companies are getting into orbit, some companies are blowing up on the launchpad as we speak. These are the world's smartest minds with endless capital. So, space is really hard. I remember one executive telling me, Oh, no, it's okay. A rocket is nothing more than a tin can with a fuse at the end. And that company never got to orbit. I eagerly watch the SpaceX launches, which they now live stream, to see how they're doing. I look at the competitors. But I would just leave you with space is hard. All this sounds, you're right, science fiction. and the actual movie where there's a happy ending, it's going to take a lot of hard work and a lot of failure along the way.

Oscar Pulido: Execution is difficult. Like you said, there's a lot of smart people trying to do this, and it makes the role of an investor perhaps really important here to identify the correct opportunities.

Reid, if we were to fast-forward, and let's say we're having this conversation again 10 years from now, which at the rate things are changing, I can only imagine what 10 years is going to look like.

But, if we were having that conversation, what developments in the space economy do you think would make your expectations today look conservative, and what should we be watching between now and then?

Reid Menge: Yes, Oscar, it's going to come down to how quickly can the industry come down that cost curve of getting mass to orbit. We're going to start there. If it's faster than expected, we're going to have a much larger space economy. If it's slower because the reusability of the rockets is more challenging than expected, the space economy gets pushed out. So, we'll start there, the pace at which this happens, that they can bring down the cost curve. The second piece would be just watching where is incremental AI compute built next decade. Are we still building in Texas in the year 2031, or is it in orbit? Based on those two answers is going to be dependent or is going to drive, I should say, the success of what this industry's building towards.

To me, Oscar, space feels like the early days of the internet, where, somebody had the concept, ‘What if we just networked people together? Wouldn't that be a great idea! That was the internet. And that got built but nobody could have foreseen the smartphone, social networking, cloud computing, all these things that came out of the basic concept of just connect people, network the world. It created arguably today's largest companies and industries from that simple idea. So, I think about the next decade, the mid-2030s is, who are the new trillion-dollar companies that are leveraging the ability to get to space cheaply and reliably, and it's going to be an amazing decade.

Oscar Pulido: It does feel like, some other, some new movies are going to come out of these next five or 10 years as the space economy, evolves.

Reid, you said an, a lot of interesting things, and I was just thinking back to some of the things you said. You said mass to orbit and the cost of that. you mentioned time to power and the importance that plays for, the builder of a data center. You mentioned two Cs and a D, which is a good framework to think about why the space economy is, becoming more relevant.

I can confirm that you and I had this conversation on Earth, when we were talking about space, but at this rate, in 10 years, we might be in space and instead talking about the economy back on Earth. I'll check in with you and see if that prediction comes true. Reid, thanks for sharing all these insights, and thanks for doing it here on The Bid

Reid Menge: Thanks, Oscar.

Oscar Pulido: Thanks for listening to this episode of The Bid. Next up, I'm speaking with Jay Jacobs about the AI economy and whether we're entering into a new investing phase of the AI story. Make sure to subscribe to The Bid and follow us on social media so you don't miss the episode.

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Who hosts The Bid investment podcast?

Oscar Pulido

Oscar Pulido

Global Head of Product Strategy for Fundamental Equities
Oscar D. Pulido, CFA, Managing Director, is the Global Head of Product Strategy for the Fundamental Equities (FE) business. In this role, he is responsible for commercial strategy, product development, and business activities to drive growth across the FE platform. He is also the host of BlackRock's flagship investment podcast, The Bid.

What topics does The Bid cover?

About The Bid (FAQs)

  • The Bid breaks down what’s happening in the world of investing and explores the forces shaping the economy and financial markets. From market outlooks to geopolitics and technology, it features insights from BlackRock experts and global thought leaders on the trends moving markets.

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