The expected $2 trillion IPO of SpaceX is not just any typical headline-grabbing listing, it could fundamentally change the way thematic ETFs are constructed, promoted, and traded. Although most discussions so far have centered on its addition to major indexes and its impact on the concentration of holdings in certain thematic ETFs, there could be something much more significant brewing underneath the surface: the creation of a solid investment platform for a “space economy” theme.

Space economy-themed ETFs have been largely a theory until now. The ARK Space & Defense Innovation ETF (BATS:ARKX) and the Procure Space ETF (NASDAQ:UFO), for example, depend heavily on defense contractors, industrial firms, and other related technology companies because there was no clear pure-play space economy leader that went public. But the imminent listing of SpaceX could alter that dynamic.

True Anchor For Space Economy

If SpaceX lists at anything close to the rumored trillion-dollar valuation, it would likely become the defining holding across space-themed ETFs.

This implies an important development whereby these thematic funds will now be anchored around a single high-growth company rather than being a basket of loosely correlated companies.

This could also trigger a wave of ETF redesigns. Asset managers like ARK Invest and VanEck may look to rebalance existing products or launch entirely new ones to capture investor demand. Expect buzzwords like "orbital economy" and "space infrastructure" to start showing up in fund names faster than a Falcon 9 booster lands itself.

When Defense ETFs Start Looking Like Space Plays

The ripple effects might not end there. Aerospace and defense ETFs, such as the iShares U.S. Aerospace & Defense ETF (BATS:ITA) and the SPDR S&P Aerospace & Defense ETF (NYSE:XAR), could see their identities shift as well.

These ETFs already have companies in their portfolios that manufacture satellites, provide communication services, and engage in defense contracts related to space operations. The addition of SpaceX would add a layer of complexity by mixing traditional defense investments with emerging space technology, thereby altering the perception of these ETFs’ holdings.

Starlink May Be The Real ETF Story

While rockets grab attention, SpaceX’s Starlink division could be the real catalyst for ETF flows. With a worldwide satellite internet network, SpaceX is at the intersection of telecom, infrastructure, and AI-driven connectivity.

This versatility might position SpaceX not only in space-themed ETFs but also technology or infrastructure ETFs. There is, however, a catch; its sheer size could dominate portfolios, much like Nvidia Corp (NASDAQ:NVDA) has come to overshadow many AI-focused ETFs.

In that sense, SpaceX may not just expand the ETF universe, it could also test the limits of diversification within it. Because when one stock represents the future of multiple industries, even thematic investing can start to look a little concentrated.

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