By Terence Tse
AI undoubtedly has the attention of investors around the world, eager to ride the crest as the AI wave washes across the hinterland of industry. However, if this concentration of whooping surfers makes you nervous, Terence Tse argues the benefits of investing in the much less occupied space sector.
Daily tech news highlights record investments in artificial intelligence, with funds, venture capitalists, and lenders competing aggressively for market share. Yet, beneath this enthusiasm lies a risk: if the AI bubble bursts, many investors may not recover their capital. While AI is widely seen as the defining technology of our era, prudent investors should consider whether this intense focus signals an unhealthy concentration of resources.
Prudent investors should consider whether this intense focus signals an unhealthy concentration of resources.
The so-called Magnificent Seven – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla – now comprise 34 per cent of the S&P 500. From 2015 to 2024, these companies delivered a combined return of 697.6 per cent, compared to the S&P’s 178.3 per cent.1 This high concentration highlights the urgent need for diversification, as the market becomes increasingly vulnerable to sector-specific shocks.
We believe that capital could be more effectively allocated to a parallel transformation that has achieved significant progress over the past decade and is grounded in sound commercial logic. The space economy offers established applications, portfolio diversification, and proven business models. Rather than dismissing AI, investors should focus on timing, setting realistic expectations, and making informed decisions.
Overlooked yet Potentially Profitable Opportunities
Many associate “space” with astronauts, rocket launches, or billionaire tourism, but the modern space industry extends far beyond these activities. Technologies from space research, such as smartphone cameras, insulation, and memory foam, are already part of daily life. The true value of the space economy lies in addressing global challenges. Satellite networks monitor deforestation and track illegal fishing with unprecedented accuracy, transforming resource management and maritime security. Satellite data also enables early warnings about environmental changes.2 For nations facing severe climate threats, space capability is essential for survival.
Another emerging area is pharmaceutical research and development in low Earth orbit, where microgravity allows for more precise studies of biological molecules and processes. This environment can accelerate drug discovery beyond what is possible in terrestrial laboratories. Currently, at least 10 companies are engaged in microgravity pharmaceutical R&D.3
Indeed, it has already begun: companies are already manufacturing medicines autonomously in space. Drugs made up in microgravity are more effective and stable, and the process enables methods that are not possible under normal gravity. Actually, a wide range of other products has also been made in microgravity environments, including artificial retinas, high-performance optical fibre, high-purity crystals, and new industrial and aerospace materials. They leverage unique environmental conditions to achieve quality, purity, and performance superior to terrestrial production. These are not speculative enterprises; they are functioning businesses with demonstrated outcomes.
The New Essentials of Fundraising
Not just knowledge, new forms of capital have been steadily flowing into this emerging yet underappreciated sector. Historically, space exploration had been the exclusive preserve of government agencies supported by hugely available public funding, a model that still prevails in many countries. However, the conjuncture of budgetary restraint and emerging commercial opportunities has spurred a wave of private capital into privately operated space ventures. Contrary to what many think about Elon Musk and Jeff Bezos, these two billionaires opened private funding pathways for space economy activities, showcasing growing investor confidence in space-based ventures.
Venture capital is accelerating innovation across the space economy. Seraphim, a leading venture capital firm focused on this sector, saw its assets under management grow by approximately 23 per cent from 2024 to 2025.
Export credit agencies have entered the market, extending beyond traditional start-up capital to absorb political and sovereign risk through government guarantees and direct loans.4 This enables banks to participate in orbital infrastructure projects that would otherwise exceed their risk tolerance.
National space programmes are also reconsidering their funding models. While most agencies remain primarily government-funded, smaller countries are increasingly adopting mixed-financing approaches that include private capital. For example, the Maldives Space Fund, launched in October 2025, aims to develop sovereign space infrastructure to address climate change, manage disasters, and strengthen the technology sector. This model offers a replicable template for other regions. There is growing interest among space agencies in Africa, South America, and Central and South Asia to pursue similar strategies and participate in the expanding space economy.
A (New and) Great Diversifier for Investors
For investors facing high concentration in technology stocks, the space economy provides both growth potential and defensive benefits.
The space economy, as an emerging high-growth industry, may be relatively insulated from broader economic cycles and market shocks. One recent study found that the space sector is uncorrelated with major market indices.5 Another analysis identified a marginally negative correlation with broader equity markets.6 This suggests that the space sector may offer better risk hedging than Bitcoin or gold. For investors facing high concentration in technology stocks, the space economy provides both growth potential and defensive benefits.
Up Ahead
We are not suggesting that investors abandon AI. However, it is important to recognize that high enthusiasm may not guarantee strong returns. Now is the time to consider new opportunities, such as the space economy, before they become widely recognized. The key question is whether investors will position themselves ahead of the curve.
Now is the time to look beyond the screen and focus on new horizons.
About the Author
Terence Tse is Professor of Finance at Hult International Business School and co-founder at the AI Native Foundation. He is also co-founder and Executive Director of Nexus FrontierTech.
