Shoot for the Stars or Is the Sky the Limit? Invesco Aerospace & Defense ETF Compared to Tema Space Innovators ETF

The Invesco Aerospace & Defense ETF (NYSEMKT:PPA) offers broad exposure to established defense contractors at a lower cost, while the Tema Space Innovators ETF (NYSEMKT:NASA) targets pure-play commercial space innovation.

Investors looking for exposure to the final frontier face a choice between long-term stability and niche growth. Choosing between the two depends on whether an investor seeks the stability of entrenched defense giants or the high-growth potential of commercial space. Both funds explore the technological landscape beyond our atmosphere with distinct mandates and risk profiles.

Snapshot (cost & size)

The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield as of the close of trading on July 20.

PPA is the more affordable option with a 0.58% expense ratio, compared to the 0.75% fee charged by NASA. This difference in costs could impact long-term net returns for investors prioritizing lower overhead.

Performance & risk comparison

What's inside

The Invesco Aerospace & Defense ETF provides exposure to 62 companies that are systematically important to the U.S. defense sector. Its largest positions include GE Aerospace (NYSE:GE) at 7.3%, RTX (NYSE:RTX) at 7.2%, and Boeing (NYSE:BA) at 6.8%. The fund was launched in 2005. This non-diversified approach focuses on firms involved in the development, manufacture, and operation of military and government space hardware, as well as homeland security operations. Its portfolio is heavily weighted toward industrials at 90%, with 10% in technology.

The Tema Space Innovators ETF targets the commercialization of space, holding 38 stocks selected through fundamental research. Its largest positions include Space Exploration Technologies (NASDAQ:SPCX) at 16.8%, Rocket Lab (NASDAQ:RKLB) at 10.2%, and Echostar (NASDAQ:ECHO) at 9%. The fund was launched in 2026. While sector breakdowns are not reported for this actively managed strategy, its portfolio encompasses launch services, satellite communication, and in-orbit infrastructure. It seeks businesses demonstrating robust competitive strengths across the global space value chain.

Which fund is the better buy?

The Invesco fund — PPA — holds a number of stocks not seen in the Tema offering, NASA. These include defense contractors L3Harris Technologies (NYSE:LHX), General Dynamics (NYSE:GD), and Northrop Grumman (NYSE:NOC). All of those are stocks benefiting from the U.S. increasing defense spending amid multiple military campaigns in recent years.

Still, PPA is heavily concentrated in U.S. stocks, with 96% of holdings in the country (the balance in developed foreign markets), compared to NASA, which has 72% in the U.S., 27% in other developed markets, and 1% in emerging markets.

Outside of SpaceX, NASA appears to be mostly in mid and small cap stocks, although the fund’s short history means such emphasis may not be the case in the future.

With ETFs, evaluating the history of performance is usually the best way to decide which fund to hold over the long term, but Tema only launched on March 30, 2026. It has returned 28.2% in its short life (and 22% in the past three months). The fund’s benchmark is the very broad MSCI World Index, so estimating past performance might have been for this space-focused ETF is impossible. Its sharp drawdown history, of more than 46% in its brief life, is a concern.

PPA, meanwhile, has returned 6.8% over the past three months and delivered excellent long-term returns, including 17.8% over the past 10 years.

In short, NASA’s small basket of securities (it can hold as few as 15 and no more than 100, per its prospectus) and short history make it too risky to invest in. PPA provides aerospace and defense exposure with a long record of strong returns. For 2026, PPA is the better ETF.

For more guidance on ETF investing, check out the full guide at this link.

Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Boeing, GE Aerospace, L3Harris Technologies, RTX, and Rocket Lab. The Motley Fool has a disclosure policy.