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- [00:00]
A
For 10 years I've been having conversations that the first trillionaire minted on Earth would come from space. And we are on the cusp of that with this IPO with Elon Musk. Space makes Earth better. So what happens when you actually unlock the private sector to be able to innovate? What does that look like? Geopolitical risk? This is actually a good environment for them because this creates more demand for the products that they do have in the market. And by the way, we've seen a flurry of multi billion dollar deals from the Pentagon for them just in the last couple weeks ahead of this ipo. Because of that, this is history are living through in real time right now.
- [00:40]
B
Hey there. I'm Liz Thomas, chief market strategist at SoFi. And this is the important part. SpaceX just went public, which means space is no longer just a scientific frontier, it's now an economic sector. And the implications are massive. It's shaping tech, innovation, the defense industry, AI and so much more. So what is the space economy anyway and how can you get involved? Our guest this week is Morgan Brennan. Morgan is an anchor at CNBC and host of the podcast Manifest Space, where she covers the intersection of space markets and industrial policy. Morgan, welcome to the show.
- [01:20]
A
Thank you so much for having me.
- [01:21]
B
Yes. And before we get started, I just have to say nothing in this episode should be treated as investment advice. And this is not a buy or sell recommendation from SoFi. I also want to say that we are recording this episode just a few days before SpaceX goes public. I am so pumped for this. I think I'm gonna learn more in this podcast than maybe anybody listening. And I'm so excited. Cause we talked about this a little bit before when we started recording that you've been covering space for 10 years. More than 10 years, for a decade.
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A
Before it became cool to do it,
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B
before it was interesting to anybody.
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A
If SpaceX is pioneering this new space economy, I think I pioneered business coverage of space. So this is definitely a moment and a milestone where all the worlds are converging. And it's pretty exciting to see, you know, how this next tranche of economic growth is going to materialize not just on Earth, but in space. Which is something that, you know, folks like Elon Musk and others have been talking about for many, many years. And I have been covering for many years. But here we are.
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B
Yeah, this is your moment. It's finally happening. Okay, so let's start with just straightforward make the case for SpaceX. Why should people invest in it?
- [02:30]
A
Well, I mean, I'm not here to give the investment advice. I'll probably leave that to you and others. And certainly there's a lot of very lively and active debate around the valuation for SpaceX right now, and for good reason. But I would say plain and simple, if you just look at the marketplace, what is the Comparable for SpaceX? And I leave that as an open ended question because I don't know that there is one. And you do have publicly traded space stocks, they're all rerating higher in anticipation of SpaceX. I would argue they're rerating higher because a lot of these companies wouldn't exist if SpaceX hadn't forged the way for to exist. And so they're actually meeting the moment rather than SpaceX coming in to meet the moment with, with them as their peers. And in general you just think about the different businesses at SpaceX and these are all different multi billion dollar opportunities and businesses that are highly disruptive. And many of them, whether it's on the space side of the business with launch and what they've done there, whether it's with connectivity with Starlink and what they've done there, and potentially what they are starting to build out here in real time on the AI side and that in terms of that convergence between hardware and soft, these are all different major businesses that others for many, many years said were not possible. And yet SpaceX has made them possible. And in the case of a Starlink, which is obviously the cash engine of SpaceX right now, that is particularly true. I mean, there was a time, not that long ago, handful of years ago, where folks were saying you can't do broadband and low earth orbit and have it be economical. And yet here we are, it's powering everything else.
- [04:01]
B
Yeah, that's pretty fascinating. Okay, having said all of that, you've already sort of alluded to this, but how much did SpaceX change the industry and how long it's been around? For a long time?
- [04:11]
A
Yeah, about 25 years.
- [04:12]
B
So it's been around 25 years, you're saying it sort of forged the way for all these other companies to get going?
- [04:18]
A
Yeah, and, and in many different ways. So obviously you could start with the space business, which is sort of the bread and butter. It's the foundational business of SpaceX. So building rockets, commercially, launching rockets, reusing rockets, which of those technologies that again, a lot of folks said, you know, not possible. If it can happen, it's amazing. But what is it going to take to happen? And now every SpaceX launches a reused rocket and they're continuing continuously innovating to reuse more and more parts of the rocket. Then the next rocket that's going to come on Starship, is going to completely change the economic paradigm, the launch paradigm, and it's going to be completely reusable at some point, which is truly the holy grail. You think about the fact that they've launched humans to space to the International Space Station and also done these private missions as well. That business alone clearly has been groundbreaking. Also, the way they contract with the government, a number of years ago it was a different company that had monopoly in terms of rocket launches and they actually had to sue the government to be able to put in a bid to compete for launch contracts. So even just if you think about the regulatory framework, you think about the legal framework, you think about the technological framework, and now you think about the, the economic framework and making space a viable business for others, themselves and others. All of that changed because of how SpaceX went about it.
- [05:44]
B
And what makes it. Is it just that it's been around a long time, they have experience now, like what makes it special compared to its competitors or even its closest competitor, if that's a thing.
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A
Well, I mean, I think probably you have to start with Elon Musk, right?
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B
Yeah, that was, that's the next question.
- [06:00]
A
What if somebody else was doing whatever opinion you have about him, you know, Elon. And by the way, I think SpaceX would say this Elon Musk is SpaceX. SpaceX is Elon Musk. But also, do not forget, he has an incredible, formidable, long standing bench of talent surrounding him. Whether it's Gwynne Shotwell as President coo, whether it's Bret Johnson as cfo, a number of engineers who have been there a long time, some of which, by the way, have gone off and started startups now in recent years, because they know what SpaceX is bringing online here in the coming years. And so they want to be ready with their own companies in anticipation of it. But you can sort of go down the bend of current and former SpaceX employees. And that in of itself, the talent piece of this is a very big part, I think, of the SpaceX special sauce here and how that talent leans into innovation. I'll give you a case in point. Starship rockets. These are the fully reusable rockets that they're moving towards bringing online here. They just did a recent test flight that was very closely watched in anticipation of the IPO. All of these future legs of growth for SpaceX that are part of this $28.5 trillion TAM event hinge on starship coming to operation. Not a single starship is built the same way. Not a single one is built the same way. They're constantly, and this is the case for a lot of their different products and their hardware. They're constantly iterating, reiterating, they call it the algorithm in terms of how they're just looking to drastically, vertically integrate every part of the process with each of their businesses and cut out any pieces that don't, that don't need to be there, anything that could stand in the way of maximal productivity and performance. It is just a constant, constant, iterative process. And so that's sort of baked into the culture of SpaceX. And that's why I think the talent of SpaceX is so highly revered and sought after within the industry as well. But it starts with Elon, right?
- [07:56]
B
So. Well, and that's, that's sort of the natural next question. What if somebody else was leading this? Would it, would it matter as much? Would it get as much news?
- [08:06]
A
Probably not, no. And I think that sort of gets at another key part of the debate around this company as it goes public, right? Because not only have they rewritten the aerospace and defense industry and not only are they now, you know, sort of thinking about and using their kind of unique methodology to tackle, you know, this AI infrastructure build out and sort of AI, you know, compute realization of the future, but they're rewriting the playbook in terms of the IPO itself and governance piece of this as well. I mean, I, I don't know that I've ever seen a company that had a governance structure quite to this extent. I mean, obviously we talked about the dual use, you know, share structure and the majority voting power of Elon Musk. I mean, he owns like 85% control. The company, basically controls the board. He basically is not, you know, cannot be removed as CEO unless he has a say in that process, you know, sort of right on down the line. And that's obviously gotten a lot of investors, you know, whipped up because it is so stark and it is so geared towards one person. And certainly that is a risk and it's, they have a number of risks and the perspectives tied to that. But I think on the flip side of that, Elon is sort of seen as the visionary of the company. And you take him and you partner him with the others in the C suite and the vision is then enacted and operated upon. And So I think SpaceX itself would say that like the company wouldn't be the same if Elon wasn't in the mix.
- [09:28]
B
Yeah, well, so obviously there are risks. I mean, I think we've all talked about them, they're well documented. Everybody understands the governance structure is different. But maybe it's a bigger risk as an investor to not have exposure or to not get involved based on that governance. Would you agree with that?
- [09:45]
A
I do think that's part of the bull thesis here. And you're talking about a visionary who's not thinking in months or years, but is thinking in decades and generations and has a track record now, Whether it's at SpaceX specifically, whether it's at Tesla, just, I mean, has made a lot of investors a lot of money over the years as well. A lot of retail investors too, which is why I think the retail component of this IPO is certainly, you know, something to watch take very seriously. I know there's a big hefty debate around what that looks like too, with these valuations, but they are rethinking that process too. And even just the lockup structure around this. But in part, I think, because many folks that have invested or would be investing in this company would be doing so for the future. They've been very clear about that. And I think the investor base that's excited about a company like that is very clear on that.
- [10:37]
B
Yeah. So we'll get into the IPO in a minute and more. The investor piece of it. But Elon has framed SpaceX as an AI infrastructure company disguised as a rocket business fair. Or how should an investor, maybe a retail investor in particular, look at this. Is it a space company? Is it about the economy? Is it about infrastructure? Is it about defense? What's the main. I think it's probably all of the above.
- [11:05]
A
And all of the above are coming together at this moment in time. Basically the ultimate layered, multi planetary, eventually you know, infrastructure company. Because all these pieces come together and they enable each other. And I think that's kind of the argument here about why you'd have all these businesses together because the total is greater than the sum of the parts. You think about the other, you know, Frontier AI Labs, and certainly they're in focus right now, right? With anthropic filing, its confidential IPO and then the, you know, possibility that we get OpenAI before the end of the year. AI is obviously a part of the SpaceX business after the XAI merger and you have Grok and now you have a deal with Cursor, et cetera. But what's different at SpaceX is that they have the hardware to go along with it. And they're from the ground up building all of that physical infrastructure around it too, right down to the chips, right, with that deal with intel and Tesla. Whereas some of these other companies, they're, they're being run by folks that are very focused on software and they're striking those deals with other companies. All of that's happening in House at SpaceX. And what the launch business does is it creates a moat, right? So you're not only just going to build the infrastructure here on Earth, all the terrestrially based AI data centers, but you're going to enable probably sooner than people realize, maybe not sooner than what Elon Musk realizes, but maybe others here in the next couple years, we'll call it, you're going to be able to build out all of this data center capacity on orbit, on the moon, all over the place, potentially as well. And I think what SpaceX has is they already have that manufacturing technology and that technical expertise from doing all of this in other parts of the business already. And so then they can take it, they can retrofit it, they can refine it, they can apply it as they're building it out.
- [12:58]
B
Has that been, I'm curious, because now here we are living in this AI age and the chatter lately is okay, the enthusiasm maybe has gotten a little ahead of itself. We don't even have the power generation to support all of this. We, we need the data centers. It's going to take years to build enough data centers. So does it become that now? Actually the big profit opportunity for something like SpaceX is data centers in space. Did that change for them because of AI?
- [13:26]
A
Well, I think it's a big part of the reason why they're going public. And Musk has been pretty vocal about this this year between the XAI merger and then even just, you know, coming forward and, and stating the ipo. I sat down with Gwen Shotwell eight years ago, did a big interview with her and one of the things I asked her in that interview was, you know, what would it take for SpaceX? When will SpaceX consider going public? And in that conversation she said it's probably going to take regular missions to Mars and then we'll consider it. And so what a difference eight years makes. Because obviously we're not, we're not at Mars yet, although that is still, I think, the North Star for SpaceX and Elon Musk and this idea of making humankind multiplanetary species and certainly all these different businesses work together to accommodate, accomplish that eventually, one day. But they need capital. I mean that's why they're going public and.
- [14:15]
B
Well, he just said that.
- [14:16]
A
Right. They need capital. And what do they need capital for? They need capital. I mean, obviously they're building out starship, which is a big investment, but they need capital to build out all this AI infrastructure, including being able to do it on orbit and beyond to realize this AI future.
- [14:32]
B
Right. So that's, that's what people are paying for today. It's that opportunity and looking out. We'll talk about time horizon a little bit later too. But this is an opportunity. It's not like forward 12 month earnings. This opportunity is going to be realized at the end of 12 months in one day. That's not the case here. We're talking about decades long of an opportunity set and a vision that's going to take a very long time for him to actually realize.
- [14:56]
A
I think potentially I've been saying this for years and you see it with Tesla, you know, who would put out ambitious forecasts and timelines and you'd have, you know, you have investors or Wall street analysts who would say that's, you know, that's unrealistic. Da, da, da. And maybe it was. And maybe he would miss some of those forecasts and timelines and like has a reputation for missing some of those, but eventually it would be realized. And I think that's very much the case at SpaceX 2. And I think they tend, well, I think they tend to hit more of their timelines closer to expectations depending on what we're talking about. If we're talking about Mars, that's just like not just ex Mars, we'll say X Mars.
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B
Okay.
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A
Just the fact that I'm even saying that just tells you where we are in the world. But they hit them, they realize them and they're very open about all of that. So yes, this is very much a play in the future. Not just the near term future, but like the long term future. And again, I think, don't underestimate the fact that they already have so much that's either they're sitting on so much data through these different businesses and then they have the ability to manufacture and produce and create around it. And that is what's different I think, think than for SpaceX, than many other companies out there is how we talk about, I keep saying vertically integrated, but it's, it's vertically integrated, but it's also, I'd say horizontally integrated between the businesses as well.
- [16:21]
B
Yeah, I mean like you said before, love him or hate Him. Right. It, it doesn't really matter. The reality is, does he make ambitious goals? Absolutely. Does he always meet those goals? As far as the timeline that he set out for himself, no. But does the goal actually occur? It usually does. Right? I mean, even the most ridiculous things that we've heard him say, there have been times when it's accomplished. Maybe it took a little bit longer, but it still happens. So it's sort of, it's one of those things like doubt him at your own peril. So we'll see. Okay, let's talk about the ipo. One of the biggest stories in my world with the IPO is the NASDAQ changed its rules to allow SpaceX in sooner. So it changed its rules broadly, not just for SpaceX, but that's definitely the impetus of this.
- [17:07]
A
But the timing cannot be denied.
- [17:09]
B
Yes. Right. It's, it's more than just a coincidence. So it used to be that it would take a long time for large companies to make it into indices like this SpaceX. And again, we're recording this just a few days before IPO, but target valuation is $1.75 trillion, which is bananas that there's a company going public as a mega cap. Right. So in a lot of ways these indices almost can't afford to not have any IT in the mix. But not everybody did it the same. So NASDAQ changed its rules to allow something like SpaceX and perhaps Anthropic and OpenAI later to get into the NASDAQ 100 after only 15 trading days. The footsie Russell changed its rules and shortened that waiting period to five trading days. The S and P decided to not change its rules. And just for everybody listening, the S and P has rules where there's at least usually a 12 month lead time. You have to show profitability for four quarters. You have to hit a certain market cap, which we would expect this would hit the market cap. But profitability, profitability isn't there. So it won't make it into the S and P. But the changing of rules to allow it into some of the other major indices, that's a big precedent to set. And there is a huge debate over whether that's good, bad, healthy, too risky, because we've got a lot of passive investing that's going to have to follow that. So it gets into some of these indices and then there's basically mandatory buying that happens in those ETFs that are tracking the indices. What is your take on this, this rule change stuff?
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A
Oh, I mean, we're living Through a great experiment. Right. And certainly you're talking with SpaceX specifically, you're talking about a very small float. And I know there's the big.
- [18:46]
B
What do you mean by that?
- [18:47]
A
Well, so there's only a small percentage, it's like sub 5% of shares that are going to be available. And then I know there's a green shoe that like can bring more supply online, but even then, very limited. And what it probably means, at least in the near term, because there is a lot of appetite for this offering coming to market, which by the way, has been the case for quite a while in the secondary market. And anytime they've, you know, opened it up for, for secondary offerings, etc, I'm hearing, you know, the reports are like coming out of the weekend or ahead of this ipo. The reports have been, you know, two times oversubscribed. I'm sure those numbers are going to change a little bit here before we even get to trading. But there's more demand than supply, at least in the near term. And then factor into your point, the passive investing piece of this, the forced buying piece of this, that'll probably be exacerbated. I suspect it's going to take some time to shake out. You're going to have to look over the coming months to see where the stock kind of settles and what that equilibrium ultimately looks like from here. But in the meantime, like, could this get messy? Yes, it certainly could.
- [19:52]
B
Yeah. Well, it usually does. Right? I mean, you know, you don't. An IPO in its first year of trading is not smooth sailing. It's usually very bumpy. And then you've got the first few quarterly reports that come out and move the stock price. So I, in my opinion, I don't think this is going to be any exception. I think especially because of the small float, because of ETFs getting involved and there being a lot of that passive buying and then so much retail, which I also want to ask about next, it's bound to have a ton of volatility. Not to mention we're not exactly in a calm and peaceful geopolitical time.
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A
Oh, that.
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B
Right, exactly. So there's all this risk floating around all the time. Headlines that are changing the markets every single day. We've got a new Fed chair, we've
- [20:35]
A
got higher interest rates now, possibly a
- [20:38]
B
hike instead of two to three cuts which we were expecting earlier this year. There's a possibility that Elon is like, ooh, I don't. Maybe this wasn't the right time. Maybe we should have Waited.
- [20:47]
A
I, I mean anything's possible. I, I, you know, I'm not, I'm not in his, his head. I don't know. I think going back to the geopolitical piece of this, I think if you put an AI arms race and I think that is the way to frame it within a geopolitical context, then and you need heavy amounts of capital to deploy that, realize that, enable that, then I think this is the time you go public. And I think that's why, I think that's why SpaceX comes to market. I think that's why Anthropic's filing. I think that's why there's an expectation that OpenAI will as well. If time is of the essence and the time doesn't have to do with the volatility of the market. But an AI arms racer AI build out. But that's, that's why coming to the market happens now despite and by the way, they're a defense contractor geopolitical risks. This is actually a good environment for them because this creates more demand for the products that they do have in mar in the market. And by the way, we've seen a flurry of multi billion dollar deals from the Pentagon for them just in the last couple weeks ahead of this IPO because of that.
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B
Oh, wow. Wow. Okay.
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A
Doesn't even get talked about because there's so much other stuff.
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B
Yeah, that's true. I mean I haven't seen much about that. So let's talk about the allocation to retail. The goal, the idea is 30% of the shares or so being available to retail, which is a record amount. A record amount. You've watched plenty of IPOs over your time at CNBC. Is this the way of the future where it's important because the market has changed enough that companies going public need to carve out that retail share? Or do we still see some of the traditional way of doing it where it gets sucked up by institutional investors and retail kind of gets left second?
- [22:27]
A
It's a question I'm not sure. I think it speaks to the fact that we're in a new environment in general where retail investors are. It used to be dumb money, smart money, and I hate that phrase. And I think one of the gifts, gifts come in poorly wrapped packages sometimes. I think one of the gifts of the pandemic was that you sort of of saw this and it was already happening, but you saw, but it kind of turbocharged it. You saw this new emerging generation of retail investors that I think are much more sophisticated, much more engaged I'm going to use a term that I've heard somebody in a very senior position at SpaceX used before. They're unbound and, and meaning that like they are just if they decide to get behind a story, get, get behind a company, get behind a sector, get behind like they will, will, they will go to the ends of the earth to educate themselves on it, follow it, track it, know it and they will think outside of the box. Which I think as you see some of these newer companies come to market like a SpaceX or like some of the crypto companies or even Palantir to me is sort of like, you know, a very big example of this in recent years as well, where maybe the sort of more traditional, you know, Wall, Wall street bastions of knowledge, they're approaching some of these companies and some of these newer sectors a little more siloed or a little more myopically or a little more just. I'm going to look at this piece of it, but I'm not going to understand what this piece could do to this piece because that we don't have comparables in the market, whatever it is. And I think with retail investors, they're thinking about it differently and outside of the box and historically we saw this in the market in the last couple of years. If they get behind something, they will buy it, they'll hang onto it, they'll ride it. They've buoyed the market more broadly by doing that. And so I find myself both on camera and off camera having more and more conversations with CEOs of companies, including companies that are maybe like more, you know, more traditional or long standing businesses, but are seeing like, you know, appetite right now because of re industrialization or whatever. Like they're so interested in engaging with retail investors in a way that they haven't been historically. So I do think we're in the midst of a retail investor renaissance. I don't know, I think it's really exciting.
- [24:46]
B
Yeah, for sure. I think this is a moment for retail investors in a lot of ways. They have access to so many more things than they ever used to and that's a big benefit. They also need to make sure that they're giving themselves access to the education
- [25:00]
A
of all of those different products.
- [25:02]
B
And I think we haven't quite closed that gap yet. We're working on that and that's something that we work really hard on at SoFi. So I think the availability and the access is a huge piece that's changed. But the other piece of it is that they Drive the narrative. I mean, the reality is they are driving most of the narrative and social media is a big part of that because anybody can go out there and just make headlines, right, and make their opinion known. That wasn't available five or 10 years ago. So the dumb money, smart money thing, I agree with you. I wish that those terms would just go away and frankly they're, they're wrong. I think this is a moment for retail. I think it's smart for companies to be carving out a big portion of their IPO for retail because that just feeds it. It just, it makes them feel like, oh, this does matter. I do matter as an investor. And the whole do it yourself wave of investing continues to grow and I think it's great. Yeah, I mean, maybe I have a biased opinion. I'm sitting, I'm sitting at SoFi. We are all about the DIY investing. But still, you know, even if I do have a biased opinion, I don't care. I'm proud of the bias. That's what I think.
- [26:11]
A
Listen, I'm with you. I think the other thing, and this is particularly true in the case of SpaceX specifically, I mean, we talk about grand experiment. It's obviously a grand experiment in terms of this offering and how it's structured around retail investors coming into this ipo. The other thing to keep in mind about this is they have a very funky lockup period. They're experimenting with the lockup process too. They've got this like tiered lockup system structure. And it's worth noting that Elon Musk and other insiders in the company are tied to a lockup period of 366 days. And like friends and family, others, employees, etcetera, they're not, you know, subject to lockups or if they are, it's shorter lockups that can, you know, can be triggered and, and you know, unfettered when certain, you know, realizations happen within stock performance, et cetera, et cetera. But like the folks at the top, for lack of a better term, are actually tied up for the long term in SpaceX as well. And so that is a different thing too. This is not, you know, a company's leadership trying to take advantage of retail investors coming in and, you know, hit the sell button. And I think that is worth noting too because I'm not so sure it's fully understood how much of overall outstanding SpaceX shares are tied to this, you know, one year plus one day lockup period.
- [27:34]
B
I, I think it's not understood because that is one of the criticisms that, oh, this is just going to end up being a liquidity event for founders and, and insiders and higher ups. But you're saying that's not, I mean,
- [27:45]
A
there's going to be, you're going to see, you know, moments of selling here, et cetera. And I'm sure there's going to be folks that, you know, realize major, including, you know, people who work for the company, used to work for the company, or long standing investors of like decade plus. Like you're going to see that happen, but it's going to be over the course of many months and in, you know, and in periods. And do I think Elon Musk is going to sell SpaceX? No, he doesn't sell any company, you know, stock in anything he runs and has founded unless he has to, because maybe he's making another acquisition and needs, needs to raise the capital. That's particularly true for SpaceX. And I don't think, I don't think that changes now. But to see, you know, see it written on paper what that lockup looks like and how different it is, it's not 90 days a different thing. And I, for better or worse, like you know, who it's, it's different. And I think it's just worth factoring into the conversation in general around again how this is structured in a different way with retail investors in mind.
- [28:49]
B
Yeah, okay. All right, let's talk about the space economy at large for a minute. Obviously SpaceX driving a lot of that. We talked about this a little earlier, but when we're, when we look at the space economy in general, what are we really, really talking about? Are we talking about AI companies? Are we talking about science companies? Are we talking about astronauts? Are we talking about defense? Like what, what is that? And maybe, well, so then it's like, okay then what sector do they fit in? Are they industrials? I know that's, Are they tech? Are they Right, so something like Uber, for example, is in industrials, but does it deserve to be there? It's an app. Shouldn't it be in tech? Right, so where is that going to fit? And are they all even going to be together?
- [29:29]
A
Oh, it's a good question. We've been having this conversation actually at CNBC not that long ago and you think about what SpaceX inclusion looks like into some of these indexes and where it fits, et cetera. And it's like it could, it could go in different places. I mean aerospace and defense, traditionally long standing has been within industrials and I guess, you know, the, the foundation of SpaceX is aerospace and defense. But to your point, it's, you know, under the hood, it's an AI company or like that's really the bet on the future. The connectivity business, the Starlink business, you know, would put it into communication services. Like you could debate all of this, but I would say space economy is sort of that next realization of technologies that better humanity on Earth. That's such a fluffy answer. I know it is, but that's really what it is. And so like you think about like the long standing example that is gps. Now we're seeing it with communications in a bigger way. Starlink being sort of the tip of the spear on that. Yeah, I mean there's the astronaut piece of it for sure. And sending, you know, humans, humans to the moon and sending humans ultimately to Mars and all of that. But then there's also, I think, just infrastructure in space that enables more innovation that benefits humanity on Earth. And so there's all different examples of that above and beyond SpaceX that if you want to dig into like let's do it, let's roll up our sleeves and do it. And then the defense piece of it, I think is also just the fact that space is sort of the first step. It's the war fighting domain. It's sort of the first step in any conflict that happens. Space and cyber. And so how do you protect all that critical infrastructure in space as well?
- [31:02]
B
Yeah, I heard recently that in order for Elon to profit from this Mars idea, there have to be like a million people. He has to get the population to a million people on Mars.
- [31:15]
A
So this is part of the pay package for Elon. Oh, so you know, he has had these elaborate pay packages. Tesla. This is like literally otherworldly. Little bit of pun intended. Billion shares that vest in tranches. Certain milestones have to be hit from a performance standpoint. But the full realization of the pay package comes when we have a million inhabitants. Humans on Mars.
- [31:43]
B
Huh. Is this assuming that people are gonna go build families on Mars? Right. Like a husband and wife are gonna move to Mars and have children there.
- [31:51]
A
Then like almost like Oregon Trails by interplanetary.
- [31:54]
B
Yeah, like who's building the hospital where they're gonna have babies on Mars?
- [31:57]
A
Like robots, AI or do you Robots and AI? So again, this goes back to this
- [32:02]
B
whole idea to have the baby and then you.
- [32:04]
A
Well, I think for the time being anybody who's going to Mars is staying on Mars. Like that's gonna be a whole other thing to figure out. And by the way, like, you know, they've talked about this, leadership at SpaceX has talked about this quite a bit over the years. And Elon, even just with this roadshow happening, has been talking about this too. But you know, this idea that Mars is a fixer up our planet and everything that's going to go, yeah, I
- [32:30]
B
mean it's up and coming, yeah, everything
- [32:33]
A
that's going to go into making Mars habitable for humans. But everything that goes into that is a heck of a lot of, you know, robotics and machines and AI that are going to like make the planet more suitable for us to be able to go and do that. All the cargo missions and all the supplies that are going to have to go again, Starship unlocks, all of this. They're not the only ones who are like working on this. But you think about that, you think about the boring company, which is like another musk startup, and what that means in terms of basically tunneling on Mars and creating the right environment within the terrain. You could just go on down the list here because I think SpaceX is kind of the big example of it, but, but we'll say Musk Co, the Musk empire. Overall, every, every one of these companies, every one of these technologies has something that's enabling life on Mars and life to be multi planetary over the longer term. They all fit together. Which by the way is part of what is fueling one of the many things that's fueling the speculation that you see a merger between Tesla and SpaceX.
- [33:39]
B
Life on Mars.
- [33:40]
A
Yeah, like Optimus robots, autonomous driving, full self driving. The role that something like Starlight plays in, you know, full and continuous connectivity because you need that. I just go on down the list here.
- [33:55]
B
What are the chances that this turns out to be like Zuckerberg's Metaverse? Oh, that was a great idea. But you know what, we're gonna go a different direction because the Mars thing's just not working out well.
- [34:07]
A
And I think they've already. It's not a pivot away from Mars, but it is a rest stop on the in between. This is probably not even the right metaphor, but I'm talking off the top of my head here to the lunar surface, right? So there's already been a shift to focus, more resources, more capability, more everything towards the moon in the nearer term to be able to realize longer term, you know, this Mars colonization vision. And there's a lot of reasons and it's not just Elon Musk, it's Jeff Bezos, it's NASA, it's you Know, go on down the list of everybody that's in the space game right now. There are a lot of reasons and arguments for why starting to build infrastructure and basically a base off of Earth on the moon first makes sense. Okay, I know it's like, it sounds crazy. It sounds like sci fi. I know it sounds crazy, but it is sci fi. It's happening though.
- [35:09]
B
It's like real wheels.
- [35:10]
A
It's happening where you have Congress meeting and you know, putting together fiscal 2027 budgets right now. Part of those budgets, you know, you think about NASA, for example. It is, it is putting together budgets for, for this, for lunar colonization. Like it's going to happen faster than everybody realizes and AI, I think turbocharges it. Now you layer quantum on top of it. It's been a slow burn for quite a few years, but I think all of a sudden it's going to be a slow burn and then boom. How did we get here? And I think we're very close to that.
- [35:41]
B
I mean, we're going to be looking at the moon and there's like a dark spot on the moon and that's. Oh, that's the new city, right?
- [35:47]
A
Yeah. I mean, it's the moving and even from SpaceX standpoint, there's the technological stuff that needs to happen for them to realize this future and the growth that they've attached to it. But the other piece of it is the regulatory piece of it and getting regulators on board and the policy piece of it that helps to unlock all of this as well. Well, very real risk and that we're in this moment. I, I talk about this all the time, but I almost think of it like a triangle. So it's like there's the technology, which includes AI and everything else, all the, all the possibilities, innovation. There's the money piece of it, which is like the capital and the investment and the business operations, et cetera, but then there's the policy piece. All of these things need to come together and they seem to be doing that right now. They need to be coming together to realize this future and all of the growth associated with it and this sort of space economy that's going to potentially benefit all of us here on Earth. And so SpaceX is sort of, you know, sitting in the middle of all of it, but it's not the only one. And I bring all of that up because even just from a NASA standpoint, they're moving very, very quickly with Jared Isaacman at the helm very quickly. And he just unveiled this huge lunar base, moon base Base vision and is already doling out contracts to realize it. And so, yes, I think sooner rather than later, you're going to start to see that lunar inhabitation, whatever you want to call it, be realized here. And by the way, you talk about AI arms race, lunar colonization, arms race with China, which is also racing to do this too. Yeah.
- [37:29]
B
Wow. Okay. All right. We talked about which sector it might fall in still, that's still sort of up in the air. Where do you think, because you talk to a lot of investors, where do you think people will pull the money from to invest in space? Where does it get funded from? Because that's one of the risks too, that, okay, something like SpaceX goes into some of these big indices or it just goes public in general, or even anthropic and OpenAI go public later this year. Does capital come out of existing AI adjacent companies and go into those. Does capital come out of Tesla and go into Space X? Like where, where does it come from?
- [38:07]
A
I mean. Well, we've got to see. I mean, heading into this ipo, we've already seen a, you know, pretty dramatic shakeout and things like semiconductor stocks, which were parabolic. Right, Right. So if you're going to take profit from somewhere and then reallocate it, that's probably a good place to do it, potentially. Right. I think there's a big expectation that Mag7 hyperscalers, you're going to see some money come out of some of those, you know, mega cap names as well, to be allocated in SpaceX. There's also the arguments out there that maybe it doesn't suck as much capital out of the rest of the equity market as everybody's anticipating because there's so much capital sitting on the sidelines in other asset classes and in cash right now. So there's just, there's a huge debate around all of it. But I have to think, think after the year we've had and particularly after the last couple of months, if you think about where we've run, especially in parts of the tech sector since, what was it, 3-30-Low, it's going to come out of those high flyers.
- [39:07]
B
There's liquidity because the market has gone up so much, and those mega cap names that have now created unrealized gains for so many people, that's where the liquidity gets sourced from first. And if you're an institutional investor, if you're managing a fund, even until times of stress, if there's redemption requests, you sell the big ones that you're up in first you sell that source of liquidity first. So there is, there is a lot of liquidity out there. Even if it's tied up in other stocks right now. Just the, the balance in people's accounts has gone up so much. Right. So we'll see. I mean, I think, I think that's going to be one of the most fascinating pieces of this to watch over. The first, let's call it three to six months, months of SpaceX being public is where does the capital come from? Does the pie actually get bigger with a new company like that now on the public market, or does it stay about the same size and just get reallocated in between? And what does that do to sentiment in other places? I don't know the answer to that yet, but I think that's probably one of the biggest open questions. I want to talk about low Earth orbit. You've mentioned it a couple times. First of all, do we call it low Earth orbit or do we call it leo? Does it have like a cubicle leo?
- [40:18]
A
Usually it's called leo.
- [40:19]
B
Leo. Okay, leo. Leo. Today I learned about leo. So, like, what's the business of low Earth orbit?
- [40:25]
A
So there's a few businesses of low Earth orbit, I would say. So if you go back two administrations to Trump, one, Jim Bridenstine was at the helm at NASA and a lot happened in, in those first four years of Trump as president. One of the things that also happened, one of the big takeaways was this commercialization of low Earth orbit, which we were already moving towards. But what all of that policy shift enabled was basically a greater unlock of LEO to sort of spur more, incentivize more companies to create more business models focused on orbit, on being on orbit. So you could see, say, communication satellites and broadband satellites like Starlink. Right. And others, you've got Amazon leo. There's a number of. And then there's a number of other, you know, satellite, you know, companies, comes companies as well. You've got Earth observation companies like Planet Labs, et cetera. And then you've got the space stations. NASA's getting ready to retire it by the end of this decade. And what NASA has gone out and done has said, you know, they said, okay, we're going to help fund and we're going to incentivize companies to go out and to build commercial space stations, to have that infrastructure for humans, for innovation, for experimentation, et cetera, et cetera, in orbit. And so you have a number of companies, a number of them public now, some of them not that are also building out these commercial space stations. Now if I just start with that business specifically what is the business of having a commercial space station? Obviously it enables more astronaut programs for more countries around the world that don't actually have their own in house space programs. That's what. Okay, so there's that piece of it and the flex that's associated with, with that. From a business and economic and innovation standpoint, there's a lot. There's actually more demand for more scientific experiments on the ISS than there is capacity to carry them out. So if you put more capacity online, then the Mercs and the Eli Lilly's and the, you know, sort of pharma companies of the world can send more experiments to space to test crystal structures and other things around and potential blockbuster drugs. So like Keytruda for example. The big claim to fame around Keytruda is that some of its composition and how it's currently administered is tied to the experiments that were done on the International Space Station. So there's an unlock there. You can 3D print organs in space. Oh my gosh, you can do it with your own stem cells. They're already like, they're already, you know, developing and growing. Red Wire is a good example of this, like grooming meniscus in space and sent it back down to Earth. You've got startups like Varda Space that are also testing all of this in real time right now. So that's one piece of the low Earth orbit puzzle. And then as I mentioned, Earth observation, which is important for defense applications, but also you think about like agriculture, you think about insurance, you think about all that fire detection, wildfire detection, all of these types of things and all of the data that's being collected. And then you take some of these satellites and Planet Labs is a good example of this because they're doing stuff with Google, they're doing stuff with NVID and they're taking all that data and they're doing edge computing. They're already starting to experiment that with some of these chips in space. So again, early innings of AI data centers. You think about what AI data centers are going to do. I mean just keep on going down the list here and that sort of gives you an idea of this emerging low Earth orbit economy that's taking shape. And I get asked this question all the time and I think I've just made some good examples of it. But like why should I care about this if I'm on Earth? Because those innovations actually help you on Earth. Space makes Earth better. And so what happens when you actually unlock the private sector to be able to innovate. What does that look like? And so that's sort of what we're on the cusp of in low Earth orbit. That was a very long answer.
- [44:23]
B
That was a great answer. All right, let's talk about the future before we close this up. We've been talking about the future this whole time, I think. But what does the future of this investing space look like? Like for the next 10 years. Do you think there are more IPOs coming, do you think?
- [44:41]
A
Yes.
- [44:41]
B
Okay, expand on that.
- [44:43]
A
Okay. I mean, you've already seen it. You've already seen a flurry of, we'll say commercial space and defense tech related, which are all sort of the same thing because most of these companies in commercial space are also, they're dual use. They're also, you know, contracting with the government, et cetera. But you've already seen a flurry of them, smaller ones, ones come to market just in the last couple of months ahead of the SpaceX IPO. And part of the reason is because again, investors have been hungry for these type of offerings and they feel like it's a good time to come to market. SpaceX obviously is a huge milestone because I think it just injects the public markets with, not that it wasn't legitimate before, but injects the public markets with a level of, of legitimacy and staying powered that maybe the skeptics before could bat down or deny. But now with like a mega, mega company coming to market that's in this space, I think that just changes the conversation and sort of the paradigm around investing in it. But you'll see more companies come to market here over the next couple of years. There's a lot of technologies that are on the edge of being realized in a big and meaningful way, but they're not even yet necessarily driving a lot of revenue or they're just on the cusp. That changes I think by 2030. So I think this is the start of something bigger in terms of the confluence of space and investing in the public markets, specifically in the private markets. I think the venture folks, and now even increasingly the private equity folks, like they got their arms around this. It took a while. I'd say in the last five years we've seen the shift and there's just a next generation behind SpaceX, a next generation behind that of startups waiting in the wings. But in the public markets, I think you're just starting to get, really, starting to get a taste of it and
- [46:40]
B
then really starting to get information about it because now it's in the public markets. Well, yeah, right. Because then there's actually day to day trading activity. There's more clarity around financial statements. There's, there's more clarity and transparency around where the revenue is coming from and maybe what businesses are doing better than others or where the time horizon is different. Which brings me to the next question of if you're an investor that is now going to get into this in the secondary market. Right. Not a private investor. We know that the lockup periods in private is much longer. If you're getting into it in the secondary market, what is a reasonable timeframe to have in mind? So let's say I want, wanted to buy, for example, I want to buy SpaceX because I want to get in on this trade, or I want to buy SpaceX and Amazon because Amazon's doing stuff up there too.
- [47:26]
A
They sure are.
- [47:27]
B
Then, okay, let's say you, you buy both of those. What are your expectations? I'm going to hold them for five years, I'm going to hold them for 10 years. I'm not going to challenge my own thesis until then.
- [47:40]
A
Right.
- [47:40]
B
You know what I mean? Like how, what's how long? Because a year is too short.
- [47:44]
A
Well, I think that's, and I think, I think that's a tough one for me to answer because obviously everybody has their own individual reasons and needs, et cetera. But space is hard and it's long lead times and how do you balance long lead times and tough problems against quarterly results? And I think the long and short answer is you probably don't. You know, I think the quarterly results are there to, you know, sort of gauge progress along the way and understand just get those updates on financials. But I, I do think it's probably you're holding a lot of these names depending on the name, depending on the technology, depending on the thesis for longer realization. I, I mean, I, I just, I just look at the macro on some of this stuff. Right. So if you're talking about, you know, space from a defense and national security standpoint, I mean defense spending is growing, growing, it's growing here, it's growing internationally. Space is growing faster than those top line numbers are growing right now because it's just a bigger and bigger piece of the pie because it was a smaller piece of the pie to begin with. And again, you're talking about critical infrastructure, any war first, shots fired in space. So a huge amount of money going there. So if you're positioned for that, you're in a good position. It's going to take some time to realize it on the civil side with all the lunar stuff. Like that's also a situation that's going to take some time to realize. But the money is already starting to flow and you're seeing that. And that will continue to, I think, feed upon itself. And then I think in terms of some of the other businesses you know, or some of the other technologies, value propositions, including things like, you know, AI, compute and space, that's probably a couple years away. But make no mistake, it is going to happen. Happen. I don't know when, but it's going to happen. And when it does, it's going to completely and utterly change the AI infrastructure narrative and who the winners and losers are and what that looks like. And specifically that sort of full realization enablement of like the application layer. Is that something you're going to be tracking on a quarterly basis? Probably not. But if you believe it's coming, which I do, then you're probably buying and holding to realize. But maybe you're buying at a lower price than what you're getting in at at the IPO for SpaceX. I don't know. To each their own. But that's probably the bigger debate is what your entry point is.
- [50:10]
B
Well, so I think that's a good message though. And I'll sort of paraphrase the message into if you're an investor trying to get into space, the space economy, and this is your first foray into it, make sure you know what your thesis is right? Is it the data centers in space? Is your thesis tied to the AI buildout? Is your thesis tied to defense? Is your thes tied to life on Mars? And then that's how you challenge your thesis later on. So let's say the stock price hasn't done what you thought it would do over a 12 month period. Is the reason you got in different than it was when you got in? Make sure that you know why you're in and what it looks like for it to be successful for you as an investor.
- [50:52]
A
Words of wisdom, by the way, I'm this whole full circle. Nvidia is probably one of the biggest seed and venture investors into this new space economy that nobody talks about really. And I think that's all you need to know about where all of this is headed. For 10 years I've been having conversations that the first trillionaire minted on Earth would come from space. And we are on the cusp of that with this IPO with Elon Musk. If you've been Tracking it and following the money, then you know that this is coming. It's happening, it's happening right now. But the timeline over which all of this is fully realized, I don't think anybody knows, but it is, It's. We're living through it. This is history that we are living through in real time right now.
- [51:36]
B
I love it. Thank you for coming. Thank you for all of this education. I think this is gonna be wonderful for everybody. It was wonderful for me, selfishly, but thank you so much.
- [51:45]
A
Oh, I appreciate the chance to nerd out.
- [51:47]
B
Yeah. And I'm so excited for you that this, it's like it's finally here, your moment of everybody cares about space. And it's really starting to take off. So I'm happ for you. Yeah, thanks.
- [51:59]
A
Thanks.
- [52:07]
B
That was a fascinating episode. And it's happening at such a critical juncture. We are literally watching history be made. So this SpaceX IPO marks a moment in history of investors actually getting involved in this space space. But one of the big things that Morgan and I talked about is that really the time horizon here matters. This is a marathon, not a sprint. Much of this space economy is going to take place. The growth is going to take place over decades. It's a long period of time, and investors need to keep that in mind. And something I want to compound off of that, I said, is that if you're an investor just getting into this space, make sure that you have a thesis about, about why you're investing in it, and check your thesis as you go, but have a reasonable time horizon set to have expectations not for this to come to fruition in the next six months, maybe not even the next year, but it could be multiple years. The second big takeaway here is that this is happening now. This is really not a question of if, it's a question of when. A lot of this takes place because much of it is already going on. And we're just learning about this, that because of the SpaceX IPO and the chatter that's heated up around it. So this is no longer just some thought experiment or somebody's fun hobby on the side. Who wanted to be an astronaut as a kid. This is real stuff that's happening now. And then lastly, the idea that space makes Earth better. I really liked that she brought that up. And the purpose of a lot of this is to make life on Earth better, is to make innovation go faster, is to broaden our opportunity sets and just have more resources. So the idea of data centers on Mars and creating more compute for AI and broadening out that innovation is really even a benefit for all of us here on Earth. So thank you for listening. I think this was a critically important episode that we will come back to for months and maybe years to come and I look forward to bringing you the next episode next week. For more from me, read my weekly column in SoFi's newsletter on the money and on the SoFi website or follow me on X at Liz Thomas Strap. Follow the Important Part wherever you get your podcasts. The Important Part is produced by SoFi in partnership with Sony.
- [54:29]
C
Podcasts investments are not FDIC insured, are not bank guaranteed and may lose value. Elizabeth Thomas is a registered representative of SoFi securities and a registered investment advisor with SoFi Wealth. This podcast is brought to you by SoFi Invest, which is a trade name used by SoFi Wealth LLC and SoFi Securities LLC. This podcast is for informational purposes only. Investing involves risk.