The Looming Constraint of the Space Industry

In this podcast, Motley Fool contributors Matt Frankel, Lou Whiteman, and Tyler Crowe discuss:

• SpaceX's plan to sunset the Falcon 9 by 2028.
• Who's ready to step up in the industry.
• Navigating the minefields of the space industry.
• Look out for dividend cuts.
• European AI Infrastructure stocks.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy.

A full transcript is below.

This podcast was recorded on Sept. 22, 2026.

Tyler Crowe: Space docks get thrown a curveball. Motley Fool Hidden Gems investing starts now. Welcome to Motley Fool Hidden Gems Investing. I'm your host, Tyler Crowe, and today I'm joined by longtime Fool contributors Matt Frankel and Lou Whiteman. Guys, we're going to get into space docks today. We're going to talk about potential dividend cuts, as well as going to the mailbag. But as we said, starting at the top, let's get into space here. Space docks have been front and center for investors, as of late. It's gathered a ton of attention, especially after the SpaceX IPO back in May. But I would say the enthusiasm for space started far before that, just to a lesser degree. Now, Lou, I'm going to steal one of your go-to lines here, but space is hard. While there's a lot of promise here, the timeline when those things may materialize can come into question from time to time. That was really laid bare recently when there was a somewhat I wouldn't say shocking, but surprising announcement that SpaceX actually plans to retire its Falcon 9 rocket in 2028. This has been the workhorse, you could say, of the space launch industry. Lou, guys, is the industry really ready to lose this vehicle in 2028? Like, I know there's a lot of stuff coming, but we haven't really seen a lot of progress yet.

Lou Whiteman: Well, there's I think a big caveat on that decision because that is assuming that SpaceX's internal successor, the Starship, is ready to take over. If it's not, there's no reason why they can't continue it. But to SpaceX eyes, the Starship is a much larger vehicle, so it's capable of bringing a lot more into orbit. Your per-ton launch price goes down. It's just like it's more efficient to have 30 people on a bus versus 30 people driving a car. I think that that is the plan, and if it happens, it'll mean that Starship is going to script. If Starship something goes wrong or it's not ready for prime time. I don't think you'll see the Falcon 9 retired as planned. I do think there's at least some wiggle there and it's upside, not downside, at least in their head, but it is a huge thing for people trying to book now looking to 2028 because you're booking into an unknown.

Tyler Crowe: Matt, one of the things that's interesting about this, too, is we're talking about shuttering a vehicle when some of the successors of it, we've talked about New Glen, for example, they had their accident where, basically, the launch Plaid blew up. Neutron Rocket has been slower to develop. Part of me wonders is saying that it's going to shut down in 2028 just a feigned response to the market?

Matt Frankel: I mean, it just there's some caveats. Elon must set some targets for that to happen. Like Lou said, that assumes that the Starship is going to be up and running and taking over, and it assumes that they don't need it, really. If they need it, it's there. It could continue, but I mean, customers can't book the space flights. It comes at really a terrible time. Like you said, the New Glen Rocket, it's been down since May. Vulcan was grounded in February. It comes at a time when launch demand is really heating up from space development agency, one of their program manager. Said recently that thousands of satellites are scheduled to launch by 2030, and there simply aren't enough vehicles to launch them. That's given what exists in the market now. It's not a great time to remove one of the main player.

Tyler Crowe: Immediately, as an investor, we think, like, who benefits? Who loses out here? Like I said, we have the obvious candidates are the publicly traded companies because they very much in the forefront of, like, investors mind rocket lab with its neutron rockets, SpaceX, probably to a lesser degree Voyager and Firefly, some recent IPOs as well. But those are only solutions here, like, who else could be benefiting that maybe people aren't thinking about because they're not necessarily public.

Lou Whiteman: Well, I think it's more even complicated than that because even the Neutron and Firefly, what they're working on, that's not going to replace the Falcon 9. Those are coming in smaller, so there is a real void there that there aren't a lot of people trying to fill, to be honest, because it's the expenses, the complexity of it. There's a bunch of ways this can go. If SpaceX is right and Starship can come online and it can just be this massive distributor of satellites, there's going to be competition all the way up and down the food chain. But if Starship continues to be delayed, or if the demands from NASA and other things, there are one of two things has to happen. Either these medium rockets are going to have to be maxed out, or the companies that want to lift are going to have to rethink their businesses, rethink their designs for less weight. I think the winners in the near term are companies like Rocket Lab that just have all this capacity to hopefully be coming online and Firefly. But I think, to be honest, I think the real winners are going to be the companies that have the DOD blessing or the Pentagon blessing because the one thing I'm sure of is that nothing will be delayed on the military side. I think for any company that I'm looking at, that part of their plan is to book capacity to launch satellites or launch something into space on the commercial side. They are a likely loser or at least delayed. It's going to take longer than they hope just based on this bottleneck.

Matt Frankel: Lose right, then I think Rocket Lab is the natural winner here. Now, the stock is priced for that. But the neutron is arriving at honestly the exact right time to take advantage, not just of the Falcon 9 not taking orders past 2028. But just to take advantage of the growing backlog of just demand for launches in general, other under-discussed winners could be the component suppliers. There's one called Karman they're guiding for 57% revenue growth this year, and companies like this, for the most part, trade at much lower multiples than the pure-play space stocks like Rocket Lab do. There are a lot of potential winners, and I totally agree with what Lou said about the companies that are backed by the DOD.

Lou Whiteman: One thing on that, though, too. The problem with the component supplier is that while they have opportunities on the launch side, if this causes delays for the commercial customers going up into space, they aren't going to buy and pay for the components going into their satellite. I think it's a pushback. I think the winner, too, here is the engineers because even if the Neutron works, it doesn't compete with the Falcon 9. What SpaceX is retiring is larger than the Neutron. There is a company, a private company, Terran, that is trying to build a Falcon 9 replacement. We need to see it going up. But engineers are going to have to figure out how to get these things smaller or to weigh less, or how they can self assemble and space. There's going to have to be a workaround, period, because we are just not going to have that heavy capacity unless Falcon Heavy or Starship come through.

Tyler Crowe: I've actually been wondering a little bit, the Terran R that I believe is actually Relativity Space. I think that's Eric Schmidt's private company that is expected to maybe not this year or the coming 12 months, but I think it likely will go public sometime sooner than another. It would definitely be one to watch. You guys, you really touched on some of the nuances of space here, and I think a lot of people looking at it just say, more stuff goes up, everybody benefits. There's a lot of misconceptions and perhaps misunderstandings of space. As we're rounding out this conversation here, like, what would be your message to investors when it comes to investing in space? What are some of these misconceptions that are maybe less discussed risk or opportunities that investors should be aware of?

Lou Whiteman: Side point to a risk, and it's something I've already said, but there are a lot of business plans that are resting on Starship's ability to capably and reliably get things into orbit, and they're not there yet. Even when they're ready, there's a lot of internal plans for Starship, plus NASA plus DOD plans for Starship. I really worry, and this is both on the side of some companies that are actually building lunar modules and building satellites. But also the component suppliers, like Matt mentioned, Carmen, Redwire, the companies that are going to sell to these companies. There is a real risk that most of the business plans that are driving a lot of these backlogs will be delayed, and that is going to depend on Starship. That doesn't mean the companies are ruined. But it does mean that I think investors should set expectations. I hope everything goes well, and there's a case where it all go to plan. But I know a lot of great businesses that are just sitting in neutral right now, waiting for Starship. What we know about A, space is hard, as you say, and B, Elon Musk's likes to set aggressive deadlines and then not hit them, there is a real risk that a lot of these valuations will be just drained over time by a slowdown that I think is inevitable.

Matt Frankel: You make a good point about Elon Musk's aggressive deadlines. The Tesla Roadster reveal is happening next week, and it was supposed to happen in 2017. That's just one example. But I would say, in addition to that, one of the biggest risks is that with more things that need to get into space, then there are rockets, which is the simple way of saying what we've been saying. The companies that have the rockets will have the pricing power. Companies whose business model is to get things transported into space could be the losers here. They could see margins compressed, at least in the near term until the bottleneck goes away.

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Tyler Crowe: A few weeks ago, Campbell's, the maker of, I would say, the most famous soup label ever made, announced a dividend cut alongside with layoffs and took cost cuts, try to shore up the balance sheet. Basically, the reason anyone actually cuts a dividend these days. It was basically 25 years to the quarter that the Campbell's company cut its dividend, one of those markers everyone tries to hit with dividend payments. Now, there was a research note that came out, and so far this quarter, 19% of dividend payout announcements have actually been cuts, and it's been the highest in six years. Basically, since COVID times is what we're seeing here higher interest rates, lots of reasons as to why this may be the case. I wanted to use Campbell's specifically because it's an iconic company and use it as a jumping-off point here because I think it highlights some signals investors use for determining dividend safety. Like dividend streaks that go on for a really long time and iconic brands that aren't necessarily great indicators over the long term. I think this story here is going to be the big takeaway is no dividend streak is safe. While you as investors, guys, and we do this all the time. When you're looking at companies, because we all have dividend stocks in our portfolios, what are some of those false flags or those data points that you see that really aren't great signals to finding a quality company that pays a dividend?

Matt Frankel: There are a few flags that I look for. One is, I use free cash flow to analyze dividend stability, not necessarily earnings per share. There's a lot of different accounting things that happen with the bottom-line earnings number that don't necessarily reflect the company's ability to keep paying dividends. I was just doing some research for this segment, and I found one company who's but, on an earnings per share basis, their dividend payout ratio was about 70%, and as a percentage of free cash flow was about 130%. That's one thing to look for. There are some warning signs. One is growing debt load, one is upcoming debt maturity. We can talk about that more if you want to, but that's one of the biggest reasons that the dividend streaks are coming to an end. You can see, like boards that have streaks like you mentioned Campbell's. A lot of companies that I follow that have 30, 40 year dividend raise streaks are now just making penny-a-share dividend increases just to say that they increased them. When you see boards start to do that, like, just giving nominal dividend increases, it's not necessarily a sign that a cuts coming, but it's a sign that the streak might be cracking.

Lou Whiteman: I have to say Matt's right. You want to look for just their ability to fund it without taking on debt because all too common companies, if they risk that they don't have enough cash to pay their dividends, they will take on debt, which is very that's short term thinking. I want to say though, one of the issues, I think, with all of this and one of the things that causes companies to make weird decisions is I almost wish that dividends weren't as automatic as they were. I wish a company could just say, this is our excess cash. We're going to distribute quarter to quarter as we see it. The market punishes that, and we do see dividend cuts as almost always a sign of stress. Management teams would have a lot more flexibility and probably run the business better if they could just not have to do what they do with buybacks, where as the cash is coming in, if we have excess, we will distribute it, versus just having, like Matt says, play the game where, well, we don't want to blow our streaks, we'll just raise it by a penny.

Tyler Crowe: To Matt, as you were saying, debt maturities, we have rising interest rates. I'm sure that that is playing a part here with why it's happening right now, as long as other points of pain, we've seen retail companies struggling a little bit. I mentioned Campbell's at the top here. As you guys have been scouring the world of potential investments and maybe looking for things that are red flags, what are some of the companies you're looking at right now where you're like, Hey, I know they pay dividends and they've been pretty reliable for a while, but this is not looking as hot as the market may be suggesting that it is.

Matt Frankel: Well, for one thing, I'm not sure Campbell's made a wrong move cutting the dividend. Their stated goal is to cut dividends to pay down debt, which at a time when you're seeing so many companies having to refinance debt that they took out during the 2020, 2021, zero-interest era, and having to refinance it today. It's not necessarily a bad move to shore up your balance sheet right now. I'm not saying they made a bad decision, but yeah, there are some others. I mean, Amcor is one, ticker symbol AMCR. They've raised their dividend for 28 consecutive years. This is the one that I was saying 133% of free cash flow. It's a 5.4% yield. Several analysts have come out and said that they're at risk of cutting. Genuine Parts is one that's really interesting, GPC. They've increased the dividend for 70 consecutive years, but their dividends really exceed free cash flow right now. It's a 134% free cash flow payout ratio compared to 57% two years ago, and a lot of that is debt. There are others like that, but for the sake of saving time, I'll pass it over to Lou.

Lou Whiteman: A couple I'd look at Chemours, the chemical company. They cut their dividend last year. I think they could have to do it again. You've seen it throughout the industry. A lot of dividend cuts. This is just a bad environment for them. Other ones I'd look at with higher rates and just the business conditions, commercial rates, like the ones that do offices and office mortgages, names like Granite Point, Orion Office, they look vulnerable right now on my screen.

Tyler Crowe: I might catch some flak for this one, but I've mentioned it a couple of times before. I actually one on my radar is actually UPS. I brought it up, and sometimes I get waved off, but everything we've mentioned payout ratios, they're north of 100%. Cash from operations doesn't cover its dividends, and interest coverage metrics are all deteriorating. I know that there's a lot of people said, Oh, it's UPS, they'll figure it out because they're in the middle of the turnaround prob. But other companies over the 12 months, that's one that's always been on my radar as a potential dividend cut candidate that perhaps is a little more controversial than others. Coming up after the break, we're going to hit the mailbag.

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Tyler Crowe: Hey, everyone, quick reminder, if you want to get a question into us, you can email us at podcast at fool.com. It's podcast with an S. We also left the email in the show description, so you can get it there. Always keep it foolish, keep it short enough, I can read on air, and we can't give personalized advice. I apologize. I'm going to say this name wrong. Today's comes from Carlos Shimkus. The question is, Hey, guys, love your podcast. We're talking a lot about chips, supply chains, and a lot of AI-related stuff. As a Hidden Gem podcast, have you found anything interesting in the AI buildout space, specifically in Europe? I think we might be a little unsatisfying here, but guys, as far as when I look at this, most of the European companies also happen to be global leaders, and so they're benefiting not just from Europe's buildout, but the US as well.

Lou Whiteman: Right, exactly. I mean, the first names come to my list and it's not very satisfying, but ASML, Schneider Electric, Siemens, all of these companies, great European companies that are doing a ton of business in the US and all over the world, related yesterday, I bailed out and other things. But I think whether I was in Europe or in the US, I think going with the established companies versus trying to play the fringe of a trend when things are overvalued, it makes sense to me to use the boring companies. There's other little companies in the weeds. Was it Prism Group in Italy does a lot of the high-voltage cables. That's been a popular one, Tyler. But I do think just playing the hits here with these pick-and-shovel makes sense, and those big companies are really good companies.

Matt Frankel: I'll second ASML. That's my number one, as the listener put it, AI build-out stock in Europe. But to get a little more in the weeds, one that I'm watching just recently filed to go public. It's called nscale. They're essentially Europe's version of CoreWeave. I love these Neo Cloud companies to watch. CoreWeave they do infrastructure as a service for AI companies. They build out data centers. They build out the compute, and then they lease it off to their customers. It's a great model. I think, as compute requirements go up, at some point, the hyperscalers are going to need to find more capital-light ways of getting the compute they need. I love this business. I have no idea how to value them. Enscale, for example, their revenue was about $141 million in the first half of this year. That grew 1,200% year over year. What price-to-sales multiple is justified by 1,200% year-over-year growth? I don't know if you guys do. They have $141 million in revenue, $56.4 billion in bookings. They're impossible to value, but I think they are going to play a big role in the future of the AI buildout. There's another one that's currently public called Nebius that has a lot of Europe exposure NBIS. But Enscale is a really interesting one. It's growing very rapidly, more of a Europe-per-play. The neo clouds are very interesting to me.

Tyler Crowe: The only other comment I would give to this is that the development rate in Europe right now is a little bit slower. If you look at, we'll call it Europe's AI champion, Mistral AI, the closest assimle we could say to open AI anthropic. I know they are different businesses, but in terms of the leader in AI in Europe, I would probably say Mistral right now. Their CAPEX plans or obligations relative to what we see at OpenAI or Anthropic right now is orders of magnitude smaller. Development rates are going to be a little bit slower. That's just by design. They're focusing a little bit more on physical AI, for robotics and things like that, especially manufacturing-related. I'm not saying that it's bad that it's slower, but the growth opportunities are just going to be not as robust. For a lot of these companies we mentioned, ASML, Schneider Electric, much of their growth, at least for the next couple of years, is going to be largely predicated in the US. We can see a buildout in Europe, but it's going to be hard to separate a company that's going to succeed as a Europe-only AI champion in terms of the AI buildout versus, for example, a company that is supplying the world in this regard. Well, that's all the time we have for today. As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards, and it's not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. Thanks to our producer, Dan Boyd, and the rest of the Motley Fool team for Lou, Matt, myself, thanks for listening, and we'll chat again soon.

Lou Whiteman has positions in ASML, Firefly Aerospace, and Rocket Lab. Matt Frankel, CFP® has no position in any of the stocks mentioned. Tyler Crowe has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Amcor Plc, Firefly Aerospace, Karman, Prysmian S.p.A., Rocket Lab, Schneider Electric, and United Parcel Service. The Motley Fool recommends Campbell's, Genuine Parts, and Voyager Technologies. The Motley Fool has a disclosure policy.