The space economy is rapidly emerging as a new frontier, with frequent global breakthroughs. The S&P Kensho Space Index has far outpaced the S&P 500 over the past year and this year, showing rising investor confidence.

S&P Kensho Space Index is up 27.4% this year against 10.2% gains in the S&P 500. Over the past year, the space index has surged more than 53% versus 10.2% advancement in the S&P 500.

Below we highlight a few factors that could drive the space-related stocks and the exchange-traded funds (ETFs) ahead.

Rising Commercial and Defense Applications

Analysts suggest the timing may be favorable for space-related investments. Lukas Muehlbauer of IPOX Research points to U.S. government initiatives like the Golden Dome missile interception system as drivers of high valuations across the industry. With both commercial and defense applications expanding, space companies are enjoying stronger fundamentals and greater market confidence.

IPO Momentum Returns to the Space Sector

After years of muted listings, space and defense companies are once again heading to public markets. While the sector had leaned heavily on SPACs in previous years, traditional IPOs are regaining traction. In 2025 alone, several high-profile IPOs have made headlines:

Karman Holdings debuted in February, surging to a valuation near $4 billion. Voyager Technologies went public shortly after, hitting a $3.8 billion valuation as its shares skyrocketed 125% on day one. Firefly Aerospace joined Nasdaq following the successful landing of its Blue Ghost lunar lander.

This renewed wave of IPO activity points to growing investor appetite for space exploration and satellite technology companies.

SpaceX’s Starship Test Launch

SpaceX achieved a major milestone on Aug. 26, 2025, with the launch of its colossal Starship rocket. After a few failures earlier this year, the rocket completed its first successful payload deployment of eight dummy Starlink satellites.

The nearly 400-foot-tall vehicle also executed an in-orbit engine relight and tested its reusable heat shield — a key technology that could dramatically cut costs for future missions. NASA has tapped Starship to serve as the Human Landing System for Artemis III. Beyond lunar exploration, its vast payload capacity aligns with Elon Musk’s vision for Mars colonization.

SpaceX, which Musk believes to hit $15.5 billion in revenues this year, was planning an insider share sale that would value the company at $400 billion, according to a Bloomberg July report, indicating its growing influence in the commercial space market.

ETFs in Focus

Given the above backdrop, for investors with a long-term horizon, now may be an intriguing time to consider space ETFs.

Procure Space ETF (UFO Quick QuoteUFO - Free Report) : Tracks the S-Network Space Index, covering companies directly engaged in space industries. Expense ratio: 0.94%. The ETF gained more than 6% on Aug. 26, 2025.

ARK Space Exploration & Innovation ETF (ARKX Quick QuoteARKX - Free Report) : Focuses on disruptive companies advancing aerospace technologies. The ETF, which charges 75 bps in fees, gained 1.2% yesterday.

Spear Alpha ETF (SPRX Quick QuoteSPRX - Free Report) : Invests in innovative firms, including those in the space sector. It charges 75 bps in fees and added 1.6% on Aug. 26.

SPDR S&P Kensho Final Frontiers ETF (ROKT Quick QuoteROKT - Free Report) : Covers frontier technologies tied to space and deep-sea exploration. The fund charges 45 bps in fees and added 1.6% on Aug. 26.