A surge in geopolitical tensions and military spending has reignited interest in the commercial space sector, with start-ups vying alongside defence heavyweights such as Lockheed Martin and Northrop Grumman for lucrative NATO contracts, according to the Financial Times.
Concerns over space security have intensified after Russia launched a satellite this summer that performed erratic manoeuvres and deployed an unknown object near foreign spacecraft. Similar behaviour has also been observed from Chinese satellites, heightening anxieties about the militarisation of space.
The escalating risks come amid a global rearmament drive that has boosted investor enthusiasm for space technology. S&P’s Kensho final frontiers index, which tracks deep-space innovators, has risen 35 per cent since April. Companies once focused on climate monitoring are now pivoting toward defence, while some are eyeing acquisitions of established contractors to gain a foothold in military supply chains.
Governments are fuelling the momentum. NATO, the Pentagon and the U.S. Space Force have all laid out plans to expand commercial partnerships. The White House has invited “non-traditional” suppliers to contribute to its $175bn Golden Dome missile shield, while Germany’s €650bn defence plan also seeks agile private-sector collaborators.
“Commercial space is fundamental to our operations,” said Major General Michael Traut, head of Germany’s Space Command. Analysts estimate that if NATO countries meet their goal of spending 5 per cent of GDP on defence by 2035, an additional $2.7tn annually could flow into security budgets.
Some companies are already seeing results. Elon Musk’s Starlink broadband network became vital to Ukraine’s defence, prompting SpaceX to launch Starshield in 2023, a service tailored for military use. Planet Labs signed a €240mn deal with the German government in July for high-resolution imaging, while Finnish start-up Iceye has drawn strong interest after providing radar satellite access to Ukraine.
Private equity has also moved in: Advent International acquired Maxar Technologies in 2023, underscoring how national security concerns are reshaping the space market.
Yet challenges remain. Many investors still recall the last overhyped “space tech revolution,” where most companies that went public between 2018 and 2022 lost value. Defence budgets are also stretched thin by competing needs such as personnel and ammunition, particularly in Europe. According to McKinsey, European NATO defence spending may double to €800bn by 2030, but only a fraction will be dedicated to space.
Start-ups also face procurement hurdles and entrenched competition from traditional defence contractors. “The commercial guys are seen as invading organisms,” said Paul Graziani, chief executive of Comspoc. “Procurement agencies have this immune system that tries to kill us.”
Some firms, such as Italy’s D-Orbit and Canada’s MDA Space, are exploring acquisitions of established defence suppliers to speed up market entry. Others argue that governments must move beyond risk-averse procurement processes that slow the adoption of new technologies.
Despite the barriers, optimism persists. Advocates believe shifting defence priorities will boost commercial opportunities. “Conflict will be less about tanks and helicopters and more about digital capability,” said Mark Boggett, chief executive of Seraphim Space. “There is a whole new requirement for where this money is going to be allocated.”
