Cheap Launch Doesn’t Remove Risk, It Only Moves It. A Space Industry Executive Explains What Starship Really Changes.

SpaceX’s (SPCX) Flight 14 has built quite a hype over the last couple of weeks. It will be the rocket’s first attempt to reach orbit, carrying 26 Starlink V3 satellites. The hype is understandable, especially as most of the attention is on what success could unlock. But I think it's just as important to ask about the risks associated with the launch. 

Starship’s recent history shows how costly one setback can be. Its latest version debuted in May. But the flight ended with the loss of the Super Heavy booster, the giant lower stage that lifts the rocket off the ground. The FAA grounded Starship until an investigation was done. Flight 13 was then aborted at the last second when engines failed to ignite, before finally flying in July. So one failure cost roughly two months between flights. 

SpaceX’s growth story leans heavily on Starship. Its IPO filing said future growth depends on developing Starship at scale. Its larger Starlink V3 satellites are built for Starship too. There’s so much at stake for the company, but even with a successful launch, these risks don’t go away; they just move further down the line. This was the sentiment echoed by Andrew Bonwick, VP of Product Development at Relm, whom I interviewed to discuss what happens after the launch.

Will Starship Create A Space Glut?

If Starship works, launch cadence rises, and prices fall. This raises a question: will there be more rocket capacity than customers? Andrew believes it's hard to call. The answer depends on how the mega-constellations progress, as they will be the major drivers of that demand. The fact that 26 Starlink V3 satellites are flying today reflects today’s demand, driven primarily by the need to have mega-constellations.

Beyond that, one use case is orbital data centers, which the company has already teamed up with Nvidia (NVDA) for. However, this is still unproven and not a demand driver in the near term. According to Bonwick:

It is difficult to say whether Starship will create over-capacity if/ when the cadence of launch increases. That will depend in part what happens with the current and future mega-constellations – including future data centers in space, something that has yet to be seriously trialed yet alone scaled in space. If these use cases scale, then capacity may remain a constraint.

In addition to overcapacity, Andrew believes there is also the issue of smaller players not needing such a concentration of capacity. This could be a company like Planet Labs (PL). In that case, they will move to alternative launch vehicles, such as those from Rocket Lab (RKLB), possibly leaving SpaceX out of that target market. SpaceX stopping Falcon 9 bookings already points in that direction, and Andrew has a point regarding smaller, alternative companies taking that market.

Operators not setting up larger constellations are unlikely to want anything like all that capacity for there use case, and will either need to compromise on their orbit by getting of at the bus-stop, or turn towards alternative (smaller) launch vehicles that will meet there needs, even if the launch cost on its own may be higher.

What Analysts May Be Missing About the Starship Launch

Cheap and abundant capacity sounds great on paper, and make no mistake, it is great! It opens up the whole space economy to us. But that in itself only moves the risk further down the chain. Companies can iterate faster, resulting in technological advancements that we may not be ready for yet.

This is the same thing that happened with AI. Processors got so good that the supply chain was just not able to keep up. We saw this in particular with memory companies, especially Micron (MU) and SanDisk (SNDK). That bottleneck continues to hinder progress, and space could experience a similar risk.

So while analysts are focused on the improving launch economics post-Starship, there are risks elsewhere. Will the companies offering software, insurance products, and orbital operations keep up? If they don’t, Starship could have a bigger problem than just a failed launch.

Lower launch costs could help companies iterate faster, but they also increase pressure on supply chains, software, mission assurance, orbital operations, and insurance. Analysts may focus on launch economics, but the next phase will depend on whether companies can operate reliably and manage that added complexity.

Andrew Bonwick’s perspective, therefore, offers an interesting view that Wall Street may be happy to ignore for now. SPCX stock is already under pressure heading into the launch. It fell around 4% on Sept. 23 after President Gwynne Shotwell filed to sell about $52 million in shares. A day later, up to 328 million insider shares were freed from lockup, with more unlocks coming in October. A failed launch in the middle of that could make the selling much worse. A successful launch would force us to worry about more risks down the road.

On the date of publication, Jabran Kundi did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.