The Smartest Way to Invest $5,000 in a Trillion-Dollar Stock Over Private Space Rivals

The potential of the space industry can be attractive to many retail investors. The problem, though, is that the flashiest names in space, like Jeff Bezos's Blue Origin and a wave of rocket and satellite start-ups, share one big flaw for ordinary investors: They are privately held. You cannot buy their shares unless you're an insider, a venture capitalist, or a deep-pocketed accredited investor with the right connections.

Moreover, those shares are illiquid, and each is an all-or-nothing bet on a relatively unproven venture. Chasing them is mostly wishful thinking for the average retail investor.

However, if you have $5,000 to put to work and you want exposure to the space sector, I would suggest going in a different direction. The smartest move may be to buy a less-hyped trillion-dollar company whose chips quietly power nearly every satellite, rocket, and missile flying today: Taiwan Semiconductor Manufacturing (NYSE: TSM).

Why Taiwan Semiconductor is the smarter choice

Taiwan Semiconductor is a publicly traded company with a roughly $2.2 trillion market cap that anyone can invest in, and it sits at the center of the entire technology and space economy.

As the world's dominant chip foundry, it manufactures the advanced semiconductors that go into almost everything, and its reach into the aerospace and defense industries is deeper than most people realize. Chips that come out of its fabs can be found inside F-35 fighter jets, and the U.S. Air Force estimates that about 90% of its precision-guided munitions use Taiwan Semiconductor silicon. The company is even launching a dedicated space chip division to meet the needs of satellite constellations and lunar missions.

Image source: Getty Images.

That is the beauty of it. Rather than betting on which private rocket companies will grow the fastest and rake in the greatest profits, you can own a supplier they all depend on. Whether the future belongs to Space Exploration Technologies (NASDAQ: SPCX), Blue Origin, or names yet to be founded, their satellites and spacecraft will almost certainly run on chips built by Taiwan Semiconductor. And unlike a speculative pure play, it is highly profitable and trades at a reasonable valuation, backed by booming demand in artificial intelligence, as well as in aviation, space, and defense.

There is one large risk I will not gloss over: geography and geopolitics. Taiwan Semiconductor is based in Taiwan, and tensions between China and the island are an ever-present cloud hanging over the stock. Any serious conflict over the island's sovereignty would likely also be devastating to the company's foundry infrastructure. TSMC is diversifying its footprint by building enormous new plants in the United States, but the risk it faces is real and cannot be dismissed. The chip business is also cyclical, so demand can ebb.

A smart buy for space economy exposure

For $5,000 in genuine exposure to the space economy, I would stop looking covetously at the private players you cannot touch and instead buy the foundry that helps power the whole industry. Taiwan Semiconductor is a unique, underappreciated trillion-dollar way to profit from satellites, defense, and AI all at once. And you can pick up shares at a fair price, and with full liquidity.

Size your position with geopolitical risk in mind, but recognize that owning the indispensable supplier often beats chasing the glamorous names that depend on it.

Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.