Space ETFs Rocked By Intuitive Machines' Lunar Mishap — Is There A Safer Bet?

Intuitive Machines LUNR recently faced a major setback with its Athena lunar lander mission, highlighting the risks associated with commercial space exploration.

The uncrewed lander missed its intended landing site by 250 meters and ended up on its side within a crater, rendering its solar panels ineffective and jeopardizing mission objectives.

The incident led to a sharp sell-off in LUNR stock, which dropped over 20% last Friday.

Also Read: What’s Going On With Intuitive Machines Shares Friday?

How Space ETFs Are Reacting

The market's reaction to LUNR's struggles has raised questions about the stability of two space-focused ETFs:

• Procure Space ETF UFO, which has 4.8% of its holdings in Intuitive Machines and felt the brunt of the stock's decline, dropping more than 53% in the past five days.
• ARK Space Exploration & Innovation ETF ARKX, which has only 0.40% exposure and was relatively insulated from the drop — falling just about 4% in the past five days.

The key distinction between these funds lies in their investment strategies. UFO is more concentrated in space-related pure plays, making it highly sensitive to setbacks like LUNR's, whereas ARKX takes a broader approach, including aerospace and defense companies that provide more stability.

A Safer Bet: ITA ETF

For investors seeking space exposure without extreme volatility, the iShares U.S. Aerospace & Defense ETF ITA presents a solid alternative.

Unlike space-focused funds that hold speculative stocks like Rocket Lab RKLB and Intuitive Machines, ITA's portfolio leans heavily on established aerospace and defense giants. Three of its top holdings — GE Aerospace GE, RTX Corp. RTX, and Lockheed Martin Corp. LMT — currently account for over 40% of the fund's total assets.

This defensive positioning has helped ITA outperform in turbulent times. For instance, a U.S. News report pointed out while many growth stocks suffered in 2022, ITA gained 10%, showcasing its resilience. Additionally, it boasts a 10-year annualized return of 11.7%, making it a strong long-term play. The fund has a 0.4% expense ratio.

What This Means For Space Investing

The fallout from Intuitive Machines' mission failure serves as a stark reminder that the space industry is still in its early stages, fraught with technical and financial risks.

Analysts continue to tout the potential of a trillion-dollar space economy. But the reality is that high costs and mission failures could limit growth to a few dominant players, according to Barchart.

For investors, the key takeaway is diversification. ETFs like UFO and ARKX can provide exposure to space innovations, but they come with higher volatility. Meanwhile, ITA offers a more stable route, blending aerospace and defense giants with measured space-sector exposure.

Read Next:

• 3 ETFs To Help You Navigate Market Volatility, Recession Risks

Image: Shutterstock