On Sunday, Dec. 11, Artemis I returned to Earth.
Last week's splashdown off the California coast, after nearly a month in space, proved Artemis's Orion space capsule can carry astronauts to the moon and bring them back safe and sound. It set the stage for more than a dozen future Artemis missions that NASA has planned. It also arguably saved the entire Artemis program from potential cancellation, setting the stage for some of America's best-known space companies to reap tens of billions of dollars in future revenue.
Disaster averted
As recently as 2019, a combination of development delays and cost overruns in building Artemis' key components -- the Space Launch System (SLS) rocket and Orion space capsule -- had space industry insiders publicly musing that the program could be rocketing toward cancellation. Subsequent reports from the U.S. Office of Management and Budget (OMB), estimating the cost of each Artemis launch at $2 billion -- and from the Office of Inspector General (OIG) of the National Aeronautics Space Administration (NASA) putting the cost at $4.1 billion -- added pressure on NASA to prove SLS could fly.
Had SLS failed to launch this month, or failed en route to the moon, or had the Orion space capsule burned up on reentry, there was a good chance the Artemis program would not survive this failure.
But SLS did survive. And with it, so does the Artemis program.
Details, details
Now, this doesn't change the fact that SLS' triumphant launch came...four years later than initially planned. It doesn't change the fact that a program first advertised to cost under $10 billion has already cost taxpayers closer to $50 billion, according to a recent tally by The Planetary Society.
Still, it's a whole lot easier to justify SLS' incredible cost now that the program has notched a success than it would have been to justify those same costs in the face of failure.
Indeed, if NASA has already sunk nearly $50 billion into Artemis, this almost becomes a point in the program's favor. The same OIG report on SLS' cost, mentioned above, also estimated that the entire Artemis program will consume $93 billion through 2025. So if we've truly spent $50 billion of that sum already, you could argue we now have "only" $43 billion more to go.
With Artemis basically more than half paid for already, it may make sense just to bite the bullet and keep spending whatever must be spent to bring the project to completion and put American astronauts back on the moon.
What that means for investors
NYSE: BA
Key Data Points
Indeed, if you're an investor in any of the big space companies involved in Artemis -- Boeing (BA +3.49%), which is the lead contractor on SLS; Northrop Grumman (NOC 0.52%), which builds SLS' main engines; Aerojet Rocketdyne (AJRD +0.00%), which builds the boosters; or Lockheed Martin (LMT 1.69%), which builds the Orion capsule -- you probably hope that this is exactly how Congress thinks about Artemis at this point. For each of these companies, billions of dollars of future revenue depend on keeping the Artemis program going.
More than just the $43 billion remaining to be spent through 2025, Boeing and Northrop together stand to reap potentially $82 billion from Artemis through their Deep Space Transport LLC, which recently won a NASA sole-source contract to run as many as 20 Artemis missions over the next decade or two. Aerojet Rocketdyne, assuming it continues building boosters for the rocket, can expect to earn billions more, and -- because it makes sense that these rockets will need plenty of Orion capsules to launch on top of them -- Lockheed Martin can count on even more billions for itself.
Reward and risk
So we're talking about a lot of money here. A lot of money that could have been at risk of never turning into revenue for the space companies if Artemis I had failed. A lot of money that now has a good chance of being spent, becoming revenue, and filtering down to these companies' bottom lines in the form of profit.
(According to data from S&P Global Market Intelligence, the average operating profit margin across the space divisions of these four big aerospace and defense companies is about 7.8%.)
As I said, with so much money already invested in Artemis, and the project off to a good start, I'm now of the opinion that Project Artemis will not be canceled, and will at least receive funding (and produce profits for its contractors) through NASA's Artemis III mission, currently scheduled to take place in 2025.
After that, who knows? Project Artemis' price tag is still astounding. Whether Congress continues to fund it in its current form may depend on whether private space company SpaceX can offer NASA an acceptable alternative at a better price. In that regard, SpaceX has proposed using its cheaper Starship rocket ship as an alternative to SLS, and the company is once again advancing toward a Starship orbital test flight, which is expected to take place anywhere from Q1 2023 to late 2024.
Starship still has the potential to disrupt SLS and its contractors. But for the time being, it's advantage: SLS.
