Why This Neuberger Berman Fund Owns so Much SpaceX

If you are interested in space travel, like Neuberger Berman investor Dan Hanson, you’ve probably been thrilled by the growth of “the space economy” but sometimes found it difficult to invest. While legacy aerospace and defense contractors are publicly traded, some juggernauts, including Jeff Bezos’ Blue Origin and Elon Musk’s SpaceX, remain private.

That’s changing. Musk is readying an IPO of Space Exploration Technologies for June, seeking to raise as much as $50 billion, which would value the company at around $1.5 trillion, making it the largest IPO in history. At the same time, Musk announced Monday that he is merging SpaceX with the privately held xAI, which owns the generative AI chatbot Grok and the social media platform X.

Driving Musk’s desire to go public is the rush to build orbital data centers for AI computing in space. In late January, SpaceX asked permission from the FCC to launch and operate a constellation of 1 million satellites to power advanced AI.

Neuberger Quality Equity NBSLX has 9.7% of its $2.1 billion of assets tied up in SpaceX, and has owned it since 2023, betting on the growth in its launch and Starlink businesses. As SpaceX prepares for its potential IPO, Hanson believes further gains for investors will be driven by the company’s new launch vehicle Starship, direct-to-cell service from Starlink, and the orbital data centers. Still, he notes potential risks, including Musk’s unpredictable reputation.

This week, Musk announced: “SpaceX has acquired xAI to form the most ambitious, vertically-integrated innovation engine on (and off) Earth, with AI, rockets, space-based internet, direct-to-mobile device communications and the world’s foremost real-time information and free speech platform.”

Neuberger Berman and SpaceX

Says Hanson: “The key to the strategic logic of combining xAI and SpaceX is the vertical integration of data center expertise. The use of proceeds for a SpaceX IPO, as first communicated by Musk in December, is to accelerate the buildout of data centers in space. The xAI team brings unmatched data center expertise to the combined organization.”

Hanson’s fund counts SpaceX as one of its largest five positions. SpaceX is the fund’s only non-public investment, and the fund’s rules permit it to raise the position to 15%. Hanson acquired the stake in late 2023, when the company was valued at $150 billion. Initially skeptical about aerospace and defense, describing governments as “very big customers that cap margins,” Hanson came to view SpaceX as “a classic disruptive, innovative business with a very deep competitive moat.”

Hanson believes further upside for SpaceX comes from its first-mover advantage. He calls the company “driven by the huge lead on the path to commercial success” for its heavy-lift launch vehicle Starship, direct-to-cell satellite internet Starlink, and its plans to deploy space data centers.

The Neuberger fund isn’t the only outsized holder of SpaceX. Ron Baron’s Baron Partners Fund BPTRX also holds a 15.0% stake, while Cathie Wood’s ARK Venture Fund ARKVX carries a 5.6% weighting.

Hanson’s fund is highly concentrated, and Hanson has strong convictions about each of its positions. The fund owns only 35 stocks, and turnover is just 10% a year. Neuberger Quality Equity ranks in the top 10% of Morningstar’s large blend category for the past three years and the top third for the last five years. Over the past 12 months, the fund is up 12.8%, landing it in the 59th percentile for the category. Morningstar analysts do not cover the fund.

What Is SpaceX?

SpaceX provides commercial launch services for satellites and customers like NASA. It also provides global satellite internet service through Starlink. As a private company, it doesn’t report revenues, but a Wall Street Journal report quoted Musk as saying it would generate about $15.5 billion in 2025, up from about $4.6 billion in 2022. The same report estimated Starlink’s 2025 revenues at $12.3 billion. In addition, Hanson says SpaceX has “billions of dollars of cash on the balance sheet.”

The total space economy is growing about 9% a year, from $630 billion in 2023 to $1.8 trillion by 2035, according to McKinsey. There are plenty of companies in the space, including RTX, Boeing, Lockheed Martin, and Northrop Grumman, as well as younger companies like Virgin Galactic and Rocket Lab.

Within the industry, SpaceX, founded in 2002, is a juggernaut, owing to its cost advantage and having more launches than any competitor. That’s despite its small size of about 15,000 employees. Hanson sees earnings before interest and taxes growing 55% a year between 2023 and 2027.

Falcon, Starship, and SpaceX’s Launch Business

The launch business includes Falcon, the first privately developed liquid-fueled rocket to reach orbit. Falcon 9 has had 580 launches, versus roughly 40 for Blue Origin and 12 for Virgin Galactic. SpaceX is the commercial leader for satellite launches because it has driven launch costs lower.

The company has an “unassailable” cost advantage in launch and “has launched more payload and trips to orbit than all competitors combined,” Hanson says. Today it costs $2,000 per kilogram to go into orbit, versus the $50,000 it once cost NASA. Ultimately, SpaceX wants to get that down to $200. Key to this is Starship, a heavy-lift launch vehicle that will be able to carry crew and cargo to Earth orbit, the moon, and Mars.

Starlink Is Growing

Satellite communications have historically been the largest revenue source for space companies. SpaceX has Starlink, Amazon has Amazon LEO, and Eutelsat has OneWeb. Starlink has roughly 8 million subscribers and 9,000 satellites. Amazon LEO will deploy its first 32 satellites (out of a projected 3,236) in February. OneWeb has more than 600. Starlink will also be one of the launch business’ biggest customers as it aims to grow its fleet. Then there are the space satellites.

Why Put Data Centers in Space?

Orbital data centers are a critical avenue for growth after the IPO. Recently, SpaceX asked for permission to develop a fleet of 1 million space satellites for data centers. These had been “a very long-dated concept—a decade plus out,” says Hanson. Now “that’s been moved to a three-to-five-year horizon.” While transportation costs would be high, he says the rationale is cheap power, since energy-intensive data centers face power limitations on Earth. In space, solar power is magnified and available 24/7. “That can dramatically lower the cost to run those data centers.”

“What’s unique and new about SpaceX’s ambition is that the window is there for significant capital fundraising around AI,” says Hanson. “There is an insatiable appetite for AI compute and taking advantage of that unmet demand.”

Space brings its own problems, including radiation. Nevertheless, plenty of companies have bought into this vision. For example, Starcloud, a startup backed by Nvidia, trained an AI model in space last year. SpaceX is one of Starcloud’s launch partners. Others, including Google, have plans for space data centers.

What If Musk Merges Tesla Too?

Tesla shares climbed 3.4% on Jan. 30, after Bloomberg reported that Musk was weighing merging Tesla and SpaceX. Such an integration could benefit both companies, according to Morningstar analyst Seth Goldstein. SpaceX’s space data centers could be used by Tesla’s AI operations. Starlink could provide connectivity for Tesla’s autos and eventually robots. Conversely, Tesla’s Optimus humanoid robots could eventually be trained to be useful in SpaceX’s operations, both in manufacturing and in space. A merger now might be viewed more favorably by the Trump administration than by a Democratic administration.

Goldstein says Musk can “use his top talent … across different companies." For example, when Musk bought Twitter (now X) he brought 50 Tesla employees to help reengineer the platform.

Says Hanson: “Musk’s unconventional approach of leading multiple independent companies has allowed each business to attract exceptional talent and deliver exceptional results. In our view as shareholders, we want to ensure the team remains fully aligned and focused on their mission. The key is that any change in capital structure or corporate form, including mergers, supports the organization’s ability to deliver against its mission.”

The Problem with SpaceX

So what’s the big If? Bluntly, it’s SpaceX’s controversial and mercurial founder. Hanson calls it key person risk, but also “Musk headline risk.” In 2025, Musk’s support for the administration and his visible role in the Department of Government Efficiency’s efforts to reduce government spending were tied to a decline in first-quarter deliveries. He is fond of disputes on social media, including one with Ryanair CEO Michael O’Leary.

Musk is frequently in the spotlight of controversy. Most recently, Grok created and publicly shared at least 1.8 million sexualized images of women and underage girls, according to separate estimates of X data by The New York Times and the Center for Countering Digital Hate.

Hanson says, “When you get a visionary, you’re by definition going outside the box. There can be controversy and other things associated with it. That’s a feature, not a bug.” He notes that SpaceX has 15,000 employees, a “phenomenal” COO in Gwynne Shotwell, and “exceptional stability in the management teams. We believe the team at SpaceX has demonstrated time and time again their ability to execute, and we have confidence that the 15,000-plus team lead by Elon and Gwynne will continue to deliver.”

Finally, how about that valuation? Hanson explains: “We would not sell a share at this price.” He’d wait for “an IPO situation, where there’s full marketing and a presentation of the business fundamentals under the hood, if we think there’s meaningful upside to support that valuation.”